The global economy may be in the midst of seven lean years of growth, according to a new forecast from CIBC World Markets Inc.
In a new report, it predicts that global growth will barely top 3% next year, and 2013 won’t be much better. Indeed, CIBC sees growth averaging 3.2% through 2014, well below the 5% pre-recession pace. “Even that modest outcome is, as we write, dependent on intelligent policy making in both Europe and the United States,” it says.
“It will take aggressive action to hold Europe’s downturn to something less severe than we saw in 2008. The ingredients of a deeper meltdown are already evident and much discussed,” CIBC notes. But it sees signs that policy makers are moving in the right direction.
The lacklustre global economy has already left its mark on Canada, CIBC says, and it expects future growth will be muted by tame demand. “Look for Canadian growth to be held to a roughly 2% pace in the next two years, leaving the jobless rate stuck near current levels,” it says.
“While the Bank of Canada had earlier warned about rate hikes in 2011, the next leg of a tightening cycle looks unlikely to be required before 2014, as the economy continues to need exceptionally low rates to stay above water,” it says.
For investors, the report notes that what’s relevant is whether sluggish growth is already priced into expectations. “Equities will likely have a decent rally when, at some point in 2012, Europe manages to protect its larger countries (Italy, Spain) and major banks from a catastrophic default. But we could still see choppy and cautious markets until there’s greater clarity there, with less-cyclically-sensitive equities outperforming the broader market,” it says.