Internal memo prepared for Morneau cites bleak economic forecast

Internal memo prepared for Morneau cites bleak economic forecast
From CBC - January 12, 2018

Canada is coming off a stellar year for economic growth, but an internal memo for the finance minister says the party's over.

The note for Finance Minister Bill Morneau, obtained by CBC News under the Access to Information Act, forecasts average annual growth of just 1.7 per cent this year through to 2022.

That slower-growth number has big implications for federal tax revenues and annual deficits, and suggests Morneau has little wiggle room for spending in Budget 2018.

The Canadian economy has been firing on all cylinders for about a year, averaging 3.7 per cent growth, with the jobless rate recently hitting a record low.

"This very rapid pace of growth is not sustainable going forward astransitory factors start to wane and interest rates will likely continue rising," says the bleak Oct. 4 note, ordered by Morneau and drawing on internal economic analyses.

"Potential growth is expected to remain low at about 1.7 per cent over the medium-term ."

The department's assessment, made three months ago, is generally in line with current forecasts by private-sector economists, who note slow growth in Canada's labour force because of an aging society, and the lack of businesses investment in equipment needed to boost labour productivity.

Need to plan

"The main message here is the strength that we had in 2017 is an outlier," said Craig Alexander, chief economist with the Conference Board of Canada, who reviewed the memo for CBC News.

"Canada ca not sustain economic growth rates of three per cent or higher. The pace of economic growth inevitably will slow, and the government has to plan for it."

'There is no silver bullet solution to raising Canada's productivity growth.' - Internal memo for Finance Minister Bill Morneau

The memo, with sections blacked out as "advice," says Ottawa has options for goosing the economy, including policies to keep more older Canadians in the workforce; to boost the number of working women; and to open the doors to more immigrants.

More women?


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