Canadian economy to grow in Q3, Q4 and next year, predicts Swiss Re’s chief economist
October 1, 2015 by Jason Contant, Online Editor
Print this page Share
Canada could see a “moderate” 3% economic growth in the third and fourth quarters of this year and 2% next year, Swiss Re’s chief economist suggested during a presentation at the National Insurance Conference of Canada (NICC) in downtown Montreal on Thursday.
The growth during the second half of this year will help compensate for the negative 0.5% growth in the first half, when there was a “technical recession,” or two negative quarters, but still positive year-on-year growth, Dr. Kurt Karl said during the session titled Global Economic Outlook. Despite the downturn in the first half, Dr. Karl said, growth is still projected to be 1% this year.
With oil prices still down in Canada and two negative quarters of GDP growth, Canada is feeling the commodity bust strongly, Dr. Kurt told attendees. “You can’t really forecast the Canadian dollar without the oil price and you can’t forecast the oil price,” he said. “Canada is doing pretty well up until the last couple of quarters. It didn’t have as big a downturn here because of good governance from the banking sector and insurance sector.”
Furthermore, “investment in mining can only go to zero,” business investment collapsed from the oil sector and inflation is subdued. Oil prices could go even lower, which “would be very bad news for Canada,” but good from a global perspective.
From a global standpoint, the top economic risk is China, Dr. Karl said, with a “20% risk of sharp downturn” or hard-landing. “China is slowing down. As it slows down, it’s tried to transition from a closed economy to an open economy and they make mistakes like trying to bail out the stock market or the need to change their currency suddenly and it’s unsettling for the world,” Dr. Karl said, adding that authorities spent about US$200 billion trying to prop up the stock market.
With China’s economy considered the largest or second largest in the world, he said, it has transitioned from closed market to open market, where its exchange rates flow more freely, capital can flow in and out of the economy, and companies can borrow more externally, not just internally and through government-owned banks. “This means we have various changes that can’t be controlled by the government and the government wants to control everything, so it’s step forward, step back,” he said. “We do think it will probably crash at some point.”
South of the border, the economy in the United States is “doing pretty well,” he said, noting that employment growth is good, unemployment is going down, housing seems to be going up. “Not a really strong growth but growing.”
But challenges remain for the global insurance industry, including how to encourage governments on risk mitigation and proper governance and how to “find the mechanisms to get to people and then sell them insurance, so they’re sufficiently insured.
“We have to engage the government, we need to have good governance, a good regulatory framework from us to have a sustainable business, but we also need mitigation, we need building standards, we need to have flood walls to protect communities,” he said.
Insurers also need improved product design and better distribution through online channels, mobile phones, agents and telemarketing centres.
More coverage of the 2015 National Insurance Conference of Canada
Have your say: