(December 23) – The 1990s was the worst decade since World War Two, say the economists at TD Bank.
“Even with the economy’s recent gains, average annual real GDP growth in the 1990’s, at 2.1%, has been almost a full percentage point below the average pace recorded during the 1980’s, and more than 3 percentage points below the pace set in the 1960’s,” says Marc Lévesque, senior economist at TD. However, he says, the good news is that things are in much better shape heading into the next decade.
TD says the major reason for Canada’s weak economic performance during the decade was the government’s fiscal position. Large public-sector deficits and external borrowing pushed total government debt to more than 100% of GDP by the mid-1990’s. Government cutbacks to get from under that burden hurt GDP growth.
But TD says a lot of those imbalances are gone, improving the prospects for the next decade. The new surplus situation creates room for tax cuts, debt reduction and new spending. Meanwhile commodity price recovery, improving corporate profits, the surge in Y2K-related spending, and rising industrial capacity utilization has boosted business investment. This is translating into greater employment and rising wages. Combine that with tax cuts and the standard of living will rise, says TD.
-IE Staff