Sunday, June 16

The Resilience of Canadian Economy within the Wake of European Crisis

The Canadian economy emerged untouched in the global downturn in 2008-2009 mainly due to its vibrant economic climate, resilient corporate sector, stable housing industry and prudent Fiscal-Financial policies. This short article analyzes key risks and possibilities towards the Canadian economy in 2013 and beyond.

1-The Canadian economy is cyclical insofar one-third of their size is dependant on exports, which too is weighted heavily in goods and metals. Move also shapes the relative strength or weakness from the Canadian dollar (CAD). Once the global economy is undergoing uncertainty, the CAD slips greater than its counterpart the united states dollar (USD). In the past, the USD and Yen, believed as safe place currencies, have enjoyed massive capital inflows within an era of uncertainty. On the other hand, once the global economy shows indications of recovery, the CAD inches facing the USD – mainly due to viable banking system in Canada in addition to goods boom triggered through the emerging economies, particularly China. Note Canada is really a key exporter of goods sector and also the TSX Exchange is really a leader within the Mining industry.

2-Presently there’s an enormous global shift happening within the composition from the Global GDP that was considered heavily in support of developed economies 2 decades back and it is now poised to become tilted in support of emerging economies within the next decade. The important thing implication of the radical global transition is emergence from the effective emerging Asian economies, India and china particularly. These emerging economies will execute huge appetite for goods and metals and for that reason galvanize the Canadian and Australian economies. This outlook underpins the effectiveness of the CAD as compared to the USD within the next 4-five years.

3-The 2 key challenges towards the Canadian economy, in the outlook during current global economic risks, would be the negative impact from the European debt crisis and also the fragility of america economy. Any serious fallout in Europe can send economic seismic waves towards the Global banking system, and Canada won’t be insulated out of this shock either. This might result into weakening of growth and productivity and exacerbate the already pronounced unemployment level in Canada. The primary reason behind this is going to be serious financial restrictions existing within the World’s greatest economy locally of Canada. These constraints are due to an unsustainable National debt and it is problematic fiscal management policies. Regrettably, this bottleneck didn’t appear in 2008 when Lehman siblings collapsed underneath the weight of prime debt crisis.

4-The above mentioned analysis openly signifies the rate of interest atmosphere will remain depressed this year and a few a part of 2013. Depending on economic stabilization in america this year and some type of European debt solution, the worldwide economy brought through the BRIC nations might get pace for the finish of 2012 (oncoming of 2013). This trend, together with already rising asset prices in India and china, will trigger hike in rates of interest in Canada.

5-The important thing impact of great interest rate hike, depending on Global economic recovery, could be around the already over-valued property in Canada. Property prices, particularly associated with the Condominium market of Toronto, are gone-valued by 10-15% and then any interest hike can result in spontaneous correction of real estate market. This could not come in the near future, but when rates start to spike up somewhere in 2013, the housing industry could get pressed right into a longer cycle of stagnation spread over couple of years. This alludes that Alternative Investments, particularly goods and metals, is going to be leading vehicles for Wealth creation in Canada within the next decade.