As 2013 opens, economic forecasters expect another year of around 2-per-cent real output growth for the Canadian economy, followed by a slight firming of growth in 2014. But the precision of the outlooks — complete to the decimal place — does not convey the great uncertainty continuing to face the world economy. As possessors of the quintessential small, open economy, this global situation makes Canadians vulnerable — all the more so as we have some serious homegrown risks as well. Of greatest concern should be the exhaustion of traditional monetary and fiscal policy tools to right the economic ship.
Canadians are justifiably proud that our economy came through the recent global economic crisis in better shape than most developed countries. Yet, as in previous major cycles, Canada’s output performance during the recent global recession was quite similar to that of the United States in timing and depth. And the U.S. economy has recently been growing faster than ours. But Canada has fared much better than the U.S. in terms of employment, although the flip side of that is a continuation of our slippage on the productivity front. And we are one of the few developed economies to not experience a large decline in housing prices. Yet. Further, while all federal and provincial governments experienced a run-up in their deficits, debt burdens remain low by international standards.