Growth is projected to strengthen through 2014 and 2015, led by exports and business investment. Improving exports result from the recovery in foreign markets and steps firms are taking to expand into the fastest-growing markets and enhance competitiveness, while business investment should be supported by declining spare capacity and cheap and readily available credit. Residential investment is likely to weaken since the housing stock seems greater than underlying demand. Projected growth should be enough to absorb the small degree of remaining excess capacity by end-2015, and the inflation rate should increase to near the 2% target rate.
With economic slack being absorbed, monetary stimulus will need to be progressively withdrawn from late 2014 to counter inflationary pressures. Should house-price pressures re-emerge, further macro-prudential measures may be needed to reduce risks to financial stability. Fiscal consolidation should continue as planned at both the federal and provincial levels of government.
Note: All data definitions based on internationally comparable standards and may differ in specific cases from common national definitions.