I think that exchange rate, commodity prices and strong US economy will keep deficit of the external account of Canada in 2018-2022. Apart from oil, I expect low commodity prices in coming years and this will make negative impact on the current-account. Now we see healthy private consumption, which supported by continued strong household spending against the backdrop of the low interest rates, cheap fuel and an improving labour market. However, monetary policy tightening and increasing prices on the energy resources will slowdown in the private consumption in the near-term. Therefore I forecast slowdown in economic growth of Canada in 2018-2022.
I expect that Canada will be able to continue its stable growth: IMF's forecast for GDP growth in 2018 is ~2.1%, unemployment rate is at the lowest level since 70s (5.8%). However, despite all these obvious signs of recovery, one should note some concerns: 1) NAFTA renegotiation. USA is very important market for Canada (2/3 of export) and, thus, NAFTA is very important agreement for Canada (that makes Canadian products competitive on US market). However, now the future of NAFTA is questionable. Moreover, taking into account Trump's protectionist policy, I consider the case for USA to withdraw from a treaty as rather probable. 2) Household debt. According to OECD, households in Canada have the highest debt-to-income ratio (> 100%) in the developed world. Coupled with the lowest unemployment rate, I consider these as a fundamental internal constraints for Canada's long-term growth. 3) US tax reform. On the one hand, this reform is likely to support US GDP growth and, consequently, Canada's GDP growth (as Canadian economy is heavily reliant on US economy). However, on the other hand, lower corporate tax was one of the Canada's competitive advantages (comparing with USA), and, consequently, this reform is likely to decrease foreign direct investments. 4) Higher US Fed interest rate. It is likely that US Fed will increase interest rate. And the net result for Canada is rather questionable. On the one hand, that will likely lead to Canadian dollar weakening and, thus, Canadian export support. On the other hand, US dollar strengthening will lead to world economy slowing down.
European import is the main driver for the economy of Canada. As per official sources of EU officers they are not expect any increase of imports of goods. In contrary China and US market's tend to increase import from Canadian business. Thus, I put moderate increase in GDP for the next 2 years
Economic growth rate I expect to slow in the next two years as household consumption and government spending slows. Recent developments in consumption has not been transferred to the increase in wages and I think that house prices will continues to slow, no considerable job growth (if any at all). They also did not announced any substantial government investments. Thus, I project the growth of Canadian economy to ease