The Canadian economy is expected to continue its moderately strong growth in 2005 and beyond, according to a survey of leading Canadian economists.

The economists said Canadian gross domestic product will maintain a solid growth rate of 3.0% this year, as well as for the 2006-2009 and 2010-2019 periods. Growth will be slightly stronger in the U.S. this year, with U.S. GDP growing 3.3%. Beyond that economic performance in the two countries is expected to move closer, with U.S. GDP growth scaling back to 3.2% and 3.1% over the mid- and long-terms, respectively.

The annual survey by Watson Wyatt Worldwide, released Tuesday, was conducted in December. It polled 43 Canadian economists and financial market from major financial institutions, investment firms and other organizations.

The economists said they expect the Canadian dollar to maintain its strong position relative to the U.S. dollar. They are calling for the C$ to reach US85¢ in 2005, dropping only slightly to US84¢ over the long-term. “This represents an upward shift from last year’s expectations of US78¢ and just over US80¢ levels over the mid- and long-terms, as forecasters anticipate consolidation of the C$ around a new level,” Watson Wyatt said in a release.

As for inflation, survey participants slightly increased forecasts to 2.0% for 2005 from 1.8% in 2004, but projected rates remain low for the long-term (at 2.0%, down from 2.1% last year), signaling continued confidence in the Bank of Canada’s monetary policies.

“According to almost all economic indicators, Canada’s economy is on track for continued prosperity in the coming decade,” said John Gilfoyle, senior investment consultant at Watson Wyatt. “Although predicted growth rates for some parameters such as average wage, corporate earnings and equity returns are slightly less optimistic than last year, the economists surveyed maintain their largely bullish outlook for the future of the Canadian economy.”

Other predictions:

  • Unemployment rate will be 7.1% in 2005, decreasing to 7.0% over the next five- and 10-year time frames;
  • Canadian equities will return 7.8% in 2005, with long-term returns are anticipated to be about round 8.0% worldwide. U.S. and international equities will return 6.0% and 7.0%, respectively, over the short-term;
  • Corporate profits are expected to increase by 7% in 2005. Medium-term predictions are higher at 7.5%, but will fall back to 6.5% over the long-term;
  • Housing starts for 2005 will be 200,000, slipping to 189,000 and 180,000 starts per year, over medium and long terms.