Canada Country Risk Report Q2 2020


Attention: There is an updated edition available for this report.

Canada Country Risk Report Q2 2020

Canada's economic growth will slow modestly in 2020 compared to 2019. While export growth will rebound modestly, gains will be undercut by slower growth in key export markets and continued transportation bottlenecks, weighing on the oil sector. Meanwhile, private consumption will face headwinds from gradually slowing job creation, and as elevated household debt loads continue to weigh on willingness to spend.

We expect the Bank of Canada will cut the benchmark interest rate by 50 basis points in 2020, bringing the benchmark policy rate to 1.25%.

Canada's fiscal deficits will narrow slowly over the next five years, with our forecasts now implying that the deficit will only drop below 1.0% of GDP in FY2024/25 (revised from FY2023/24). Prime Minister Justin Trudeau's efforts to fulfil key campaign promises will see increased social spending and green energy invest-ment. Moreover, the Liberal Party's need to make political compromises with the more left-leaning New Democratic Party, after Trudeau's Liberal Party failed to win a majority in the October general election, will further drive up expenditure growth.

Key Risks



On the downside, greater-then-expected delays to pipeline expansion plans would weigh significantly on oil export and production. We also cannot rule out a trade-related downside shock to global growth and commodity prices, which would adversely affect Canadian exporters.

Similarly, if the novel coronavirus (Covid-19) epidemic is more long-lasting than we anticipate, this could weigh on global commodity prices and growth, and feed through to weaker Canadian exports and fiscal revenues as well as exerting downward pressure on the exchange rate.

On the upside, it appears that global manufacturing growth may be stabilising. Stronger then expected growth in these markets could offer tailwinds to commodity prices and overall export demand.


Executive Summary
Core Views
Key Risks
Country Risk Summary
Economic Risk Index
Political Risk Index
SWOT
Economic – SWOT Analysis
Political – SWOT Analysis
Economic Outlook
Economic Growth Outlook
Easing Global Trade Risks No Game-Changer For The Canadian Economy
GDP By Expenditure Outlook
TABLE: GDP GROWTH FORECASTS
TABLE: PRIVATE CONSUMPTION FORECASTS
TABLE: GOVERNMENT CONSUMPTION FORECASTS
TABLE: FIXED INVESTMENT FORECASTS
TABLE: NET EXPORTS FORECASTS
Monetary Policy
Bank Of Canada's Dovish Shift Reinforces View For Modest Monetary Easing
Monetary Policy Framework
TABLE: MONETARY POLICY FORECASTS
Fiscal Policy And Public Debt Outlook
Increased Social Spending, Political Compromises Will Widen Canadian Fiscal Deficits
Structural Fiscal Position
TABLE: FISCAL AND PUBLIC DEBT FORECASTS
TABLE: MAIN REVENUE AND EXPENDITURE CATEGORIES
Currency Forecast
CAD: Dovish BoC To Weigh On Canadian Dollar In The Short Term, Neutral Outlook In The Long Term
TABLE: CURRENCY FORECAST
10-Year Forecast
The Canadian Economy To 2029
Structural Factors Will Constrain Growth
TABLE: LONG-TERM MACROECONOMIC FORECASTS
THIS COMMENTARY IS PUBLISHED BY FITCH SOLUTIONS COUNTRY RISK & INDUSTRY RESEARCH and is NOT a comment on Fitch Ratings’ Credit Ratings. Any comments or data included in the report are solely derived from Fitch Solutions Country Risk & Industry Research and independent sources. Fitch Ratings analysts do not share data or information with Fitch Solutions Country Risk & Industry Research.Canada Country Risk Q2 2020ContentsPolitical Outlook
Domestic Politics
Quick View: USMCA Signed Into Law In US, Bolstering Sentiment
TABLE: POLITICAL OVERVIEW
Long-Term Political Outlook
Climate Change And Demographics Are The Biggest Long-Term Political Challenges For Canada
Global Macro Outlook
Economic Stabilisation Continues And Inflation Picking Up Slowly
TABLE: GLOBAL MACROECONOMIC FORECASTS (2019-2024)
TABLE: DEVELOPED MARKETS – REAL GDP GROWTH, % y-o-y
TABLE: EMERGING MARKETS – REAL GDP GROWTH, % y-o-y
Index Tables
TABLE: CANADA – MACROECONOMIC DATA AND FORECASTS

Download our eBook: How to Succeed Using Market Research

Learn how to effectively navigate the market research process to help guide your organization on the journey to success.

Download eBook