Canadians strugling with debt may be the biggest threat to their own economy, suggests the Outlook 2013 video and summary paper released Tuesday by Toronto-based Richardson GMP Ltd.
But experts at the firm remain cautiously optimistic because of possible growth worldwide.
Canadian gross domestic product growth has not been great, says Gareth Watson, vice president, investment management and research, Richardson GMP in Toronto, and while unemployment numbers have been good recently those numbers may not be sustainable in the long run.
More importantly, Canadians have a high level of consumer debt, says Watson, which could be a problem when interest rates are raised towards the end of 2013 or some time in 2014.
“That’s just going to complicate matters,” he says, “because higher rates, [and it] doesn’t matter what jurisdiction you’re in, is never a good thing for economic growth.”
Of course, it’s never a good idea to look at Canada’s economy in isolation, says Watson, because it is so tied to the United States, China and Europe. If those trading partners do manage to grow over the next year and into 2014, he says, that will offset, to some extent, the expected decline in the Canadian economy due to rising interest rates.
According to the outlook report, global growth, if somewhat muted, is in fact a real possibility. China’s economy seems to have bottomed, says Watson, and the U.S economy is in fact growing, albeit at a very slow pace. “So, there are opportunities here where we could see an acceleration,” he says, “which would obviously benefit Canada.”
If that acceleration in growth does happen, Canada’s economy will benefit most from global demand for natural resources.
The largest opportunity for the Canadian economy still,” says Watson, “is a recognition of our leverage to resources, that we are a resource-based economy.”
While Watson does not anticipate a return to the “great days” of natural resources from 2003 to 2007, there will be opportunity in that space if the global economy picks up.