In the wake of upward revisions to prior quarters, Fitch Ratings boosted its growth forecast for the Canadian economy in 2019.
The rating agency hiked its growth forecast for 2019 to 1.7% from its previous forecast of 1.5%.
The change follows revisions to growth results in the first half of 2019 and fourth quarter of 2018.
Fitch’s growth forecasts for 2020 and 2021 are unchanged at 1.6% and 1.7%, respectively.
“Consumption will grow steadily, helped by a firm labour market and a recovery in housing activity,” it said in a research note. “We expect a positive contribution from investment, despite trade risks.”
Fitch also expects government spending to provide some support for growth.
“A minority Liberal government […] is likely to increase public spending,” it said, noting that the deficit for fiscal 2020 will likely come in higher than predicted in the last federal budget.
Given the modest growth forecast, Fitch expects the Bank of Canada (BoC) to keep interest rates at 1.75% in 2020.
“Despite several U.S. Fed rate cuts in 2019, the BoC has remained cautious about the risk of reflating the housing market,” it said. “That risk will persist in 2020, and the apparent reduction of trade risks coupled with the firm labour market and services performance has weakened the argument for near-term rate cuts.”