Ontario’s economy will remain in a modest-to-moderate growth mode for another two years until the impact of a depreciated Canadian dollar boosts international trade and business investment, according to the latest economic forecast by Central 1 Credit Union (Central 1).
“Rising exports will eventually lead to larger increases in business investment and job creation, but I don’t see that happening until 2016,” said Helmut Pastrick, Central 1’s chief economist.
Pastrick predicts that a trade surplus and rising corporate profits in the next two years will set the stage for more business investment and faster economic growth after 2015. The biggest change since his last forecast six months ago is the decline in the loonie.
“In this forecast I have the loonie at 87 cents U.S. If it drops further, say to 80 cents as some suggest, Ontario will enjoy even more economic expansion in 2016-18,” Pastrick said.
The Central 1 forecast predicts real gross domestic product (GDP) will rise by 1.9 per cent in 2014, 2.4 per cent in 2015, about three per cent in 2016 and more than three per cent in 2017 and 2018, with faster U.S. growth and a lower loonie the main catalysts for growth.
The forecast notes that the labour force participation rate has been dropping. If it does not increase, Ontario will face labour shortages and considerable wage pressure by 2017, Central 1 says.
The forecast suggests the housing market will remain range-bound until 2017-18 when activity picks up with the faster growing economy.
Central 1 is the central financial facility and trade association for the British Columbia and Ontario credit union systems.