National Bank releases Winter economic outlook

National Bank’s team of economists unveiled their economic and financial forecasts for 2007 today.

Thanks to rapid industrialization in emerging Asian countries such as China and India, which have a combined population of 2.3 billion, the world economy should continue to expand in 2007, albeit at a slower pace.

In the United States, the economic slowdown already underway will spread in 2007 as American households become more focused on savings in the wake of the real estate sector’s nosedive. Although its fundamentals are among the most solid of all G7 nations, Canada will not be protected from the headwinds blowing south of the border in 2007, with a relatively modest 2.2% growth in GDP predicted.

Regional disparities within Canada should increase in 2007, according to Clement Gignac, chief economist of National Bank and senior vp and strategist at National Bank Financial. With their wealth of natural resources, the western provinces will continue to lead the pack. In Ontario and Quebec, economic growth will once again be below 2% in the coming year.

There is good news on the horizon for Canadian households in 2007, with projected cuts in the Bank of Canada’s key rate likely to total close to 100 basis points. For businesses, this loosening of monetary policy should produce a drop in the loonie, which is expected to take a break from its climb of recent years and settle between 85¢ and 88¢ before rising to trade on par with the greenback by the end of the decade.

On the markets, 2006 was a bumper year for Canadian investors with most financial asset classes registering their fourth consecutive year of positive returns. Despite the climate of optimism currently reigning on the stock market, Gignac reminds investors to continue exercising caution in 2007.