Optimistic outlook

Optimistic outlook

By Communications Staff

December 12, 2016

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Uncertainty from the US election and a rise in anti-trade rhetoric were cited as reasons for the slow export growth, reduced business investments and increased inflation we can expect for Canada in 2017, according to Smith School of Business experts.

Evan Dudley (Finance) made his predictions for the 2017 Canadian economy at the annual Queen鈥檚 Smith Business Forecast Luncheon held last week in Kingston.

Blair Robertson (Finance) makes a presentation on the local economy during the annual Business Forecast Luncheon hosted by the Smith School of Business. (Supplied Photo)

鈥淚t鈥檚 not just Donald Trump and the challenges ahead for Canada-US relations that should concern us,鈥 Dr. Dudley says. 鈥淭he world is shifting towards greater protectionism 鈥 in the last six months alone, 145 new trade restrictions were imposed globally.鈥

Slow export growth, reduced business investments, and trade uncertainty will constrain output for Canada, he says. The coming year may see marginal growth in Canada鈥檚 real GDP, up 1.75 per cent from 1.40 per cent in 2016.  As well, persistent low oil prices and the difference in monetary policies between the U.S. and Canada will keep the value of the loonie down, with the Canada/US exchange rate holding at $0.75 USD, Dr. Dudley predicted.

Trade restrictions and expansionary fiscal policy on both sides of the border will push prices higher in the near term, with inflation expected to rise to 1.75 per cent from 1.5 per cent in 2016. The Canadian unemployment rate will remain around 7 per cent due to uncertainty about US economic policies under the Trump administration and low business spending in Canada.

Dr. Dudley鈥檚 forecast was not all doom and gloom, however, with strong growth projected for Kingston鈥檚 local economy.

The event closed with a panel discussion on 鈥淐reating the Conditions for Local Economic Growth,鈥 moderated by the Smith School of Business鈥 Ken Wong (Marketing). Panel members included Mayor Bryan Paterson and Councillor Laura Turner.

The 2017 Forecast
鈥 Real GDP growth rate of 1.75 per cent
鈥 Inflation rate rise to 1.75 per cent
鈥 Unemployment rate unchanged 7.0 per cent
鈥 Interest rate (prime) unchanged at 2.7 per cent 
鈥 Exchange rate (US/CDN) unchanged at $0.75

Wong emphasized the need to 鈥渂roaden the tax base, foster more population growth, and, most of all, increase private sector investment.鈥 Ms. Turner spoke to the city鈥檚 strengths as a tourist destination, noting the benefits of the low Canadian dollar in attracting US visitors.

Mayor Paterson said 鈥2016 has been a great year鈥 for Kingston, citing recent multi-million dollar investments in the city from Feihe International, a China-based manufacturer of infant formula, and Portuguese food processor Frulact Group. The goal, the mayor explained, is 鈥渂randing Kingston as a city of entrepreneurship and innovation and working together to grow the city.鈥

Dr. Dudley shared the mayor鈥檚 optimism for Kingston looking forward, citing two expansion projects 鈥 Providence Care ($300 million) and the municipal airport ($16 million) 鈥 and the new Dunin-Deshpande Innovation Centre at Queen鈥檚, as initiatives that will help spark growth in the city.

In addition to the forecast and panel discussion, attendees were treated to a non-traditional take on investment strategy from Blair Robertson (Finance) and a brief history of the forecast luncheon from the event鈥檚 founder Merv Daub, the Smith professor emeritus who established the luncheon 35 years ago to forge a connection between the school and the greater Kingston business community.

Smith Business