Canadian Outlook Long-Term Economic Forecast: 2004

This annual economic forecast examines the long-term economic outlook for Canada – all major components including consumer expenditures, housing, government, non-energy business investment, and trade. The outlook for the financial, labour, and energy markets is also given along with costs and prices. The U.S. economic outlook is presented in a separate section.

Document Highlight

• Canada’s economy is expected to see compounded annual growth of 2.6 per cent between 2004 and 2025, slightly above potential output growth.
• Following near-term recovery, real export growth will weaken over the long term because of slowing U.S. growth and an appreciation in the dollar.
• CPI inflation will remain close to the mid-point of the Bank of Canada’s target range over the long term, nudging up to an annual gain of 2.3 per cent by 2025.
• The Canadian dollar will appreciate toward the equilibrium value in the 2007–2025 time period, thanks to a realignment of global capital flows.
• Interest rates will rise rapidly in the medium term and then remain static at a steady-state level throughout the long term.
• Government spending will be a drag on overall growth over the long term, but continued prudence will ensure reasonable surpluses through 2025.
• Construction of new housing units will decline almost unchecked over the long term as demographic factors weaken new household formation.