Conference Board says tenuous European economy is a risk to Canadian GDP growth

OTTAWA – The Conference Board of Canada says the European economic situation remains tenuous and poses a “significant” risk to Canada’s near-term performance.

The Ottawa-based think-tank’s latest analysis projects Canadian real gross domestic product will grow a “tepid” 1.8 per cent this year over 2012.

It also expects Canada’s economic growth will accelerate to 2.4 per cent in 2014 and 2.6 per cent in 2015 — aided by low interest rates and improving business and consumer confidence.

The Conference Board says its outlook is relatively unchanged from its the quarterly analysis issued during the summer, before Canada reached a tentative trade agreement with the European Union.

The board notes that the European Central Bank has recently lowered a key interest rate to a record low 0.25 per cent to counter the region’s slow economic recovery and low levels of inflation.

It says Europe’s performance and the global economy generally will depend heavily on a solid improvement in U.S. economic growth over the coming two years.

In turn, it says U.S. growth has been hampered by a number of domestic and international factors, including a lack of investment spending by the business sector due to lingering effects of the 2008-9 recession and Washington’s unpredictable budget policy.

“Also, the financial crisis in the eurozone has not been helpful. We expect some of these uncertainties to ease over the near term, leading to rising growth in real investment spending,” the study says.