Whats in store for the year in 2020 for the economy

Predicting what will happen in 2020 is no easy task, let’s start and  see what the Bank of Canada has to stay. The Bank of Canada projects that Canadian economy will grow by 1.5 percent in 2019, 1.7 percent in 2020 and 1.8 percent in 2021.

We sought out 4 opinions to see if there is a consensus amongst the experts with the Bank of Canada and there  seems to be a general agreement from the BDC, Conference Board of Canada, National Bank and Deloitte. Amongst these experts the economy will grow roughly 1.9% in 2020, but 2019 saw quarterly fluctuations with the 4th quarter slowing at 0.1% growth or less . All seem optimistic that the big “R” recession will not happen.


The Economy has slowed in 4th QTR as consumer consumption and housing lost momentum and GDP growth was flat (0.1%) as thousands of jobs were lost. BDC expects the economy to produce modest growth in 2020. The unemployment rate is now 5.7% in Canada, the lowest in the last 40 years.

Conference Board of Canada

The Conference Board of Canada forecasts GDP to expand by 1.8 per cent in 2020 and 1.9 per cent in 2021. This is up slightly from 2019’s 1.7 per cent gain. Canada’s trade sector will continue to be challenged by weak global growth. Business investment has been dismal over the past few years. But prospects for energy investment are looking much more promising, thanks to improvements in energy takeaway capacity. The outlook for the non-energy side remains moderate.

Canada’s economy will be supported by strong labour markets and modest growth in consumer spending. While most provincial governments are expected to maintain a high degree of spending restraint as they work to balance their books, at the federal level the newly re-elected Liberal government is expected to increase spending and reduce taxes.

National Bank

The National Bank states Canada had a rough end to 2019. Disruptions caused by the CN rail strike and rupture of the Keystone pipeline, and temporarily weakening demand stateside meant that trade was major drag on the economy last quarter. As such, Canada’s real -0.8 GDP growth may have been close to zero in 2019 Q4. That’s weaker than what the central bank expected for the quarter.  A sharp rebound in Canadian exports can be expected as U.S. demand returns to normal this year ─ the atypical quarterly slump in U.S. import demand in Q4 was the worst in a decade.


Deloitte estimates that growth averaged 1.7 percent in 2019, slightly higher than the 1.6 percent they predicted, but the improvement is largely related to Statistics Canada revisions to prior data. Growth should accelerate towards 1.9 percent in 2020, as the benefit of lower borrowing costs outweighs the slightly stronger loonie, before gradually decelerating towards its potential rate of growth – which we estimate to be approximately 1.7 percent .

USA Protectionists Policy – The Trump Effect

Global trade instability has disrupted supply chains for USA manufactures as they had to scrabble to deal with the tariffs on products from China and other Trump administration trade policies. Some firms are facing short-term profit pressures because of the tariffs as they have absorbed the costs and the result is job uncertainty at some these companies. The signing of the North America Free Trade Agreement (USMCA) this month between the USA, Canada and Mexico will help create a more stable business environment as trade rules are now law. One fact that seems to be lost in the global trade discussion is that China’s cost advantage is not just labour costs, they are also the biggest users of coal plants to power their industrial electrical grid. China is still classified as a third world developing nation even though they are the second largest economy in the world. Until the China/USA Trade agreement is settled there will be some instability left in global markets and that may not happen anytime soon as the trade battle of who makes the next generation 5G mobile networks is not over..

The Side Effects of The Bank of Canada’s Easy Money Policy of Low Interest Rates

A growing concern of the economy is that the cost of living is growing faster than wage growth (2.5% in 2019), the CPI had a 2.3% increase, the cost of food went up 3.4% and rental housing 5.9%. It has been estimated renters in the housing market spend 40-50% of their income on housing. Higher rents is a side effect of the increase in home prices due to a low interest rate policy and a housing shortage in some urban markets cause by population growth. Ontario bankruptcies and consumer proposals increased by 15.9% in the first ten months of 2019, while Canadian insolvencies increased 9.7%. This pace of growth of financial distress is accelerating and is perhaps an early warning sign of potential turbulence ahead still for the economy.