Will Canada Follow United States?

Canada’s economy has grown remarkably during the last few years but this year can be very different. Recent economic data has already shown signs that the world's eighth largest economy is slowing down as the recession in the U.S. broadens.

In fact, in the Q4 of 2007, Canada's economy grew at the slowest pace since 2003. According to the Bank of Canada, tumbling exports to the U.S. may limit the 2008 economic growth to a seven-year low of 1.8 percent.

One of the biggest negatives disrupting the Canadian economy growth is the high exchange rate. The currency rose 20 percent against U.S. dollar in the past 12 months, making Canadian goods more expensive abroad.  Moreover, 40 percent of the Canadian economy is export related and the U.S. absorbs three-quarters of it.  Data shows that Canada's current account in Q4 fell into deficit for the first time since 1999. The indicator has fallen to a C$513 million deficit from a record C$12.2 billion surplus two years ago and a C$6.4 billion surplus in the Q2.

Anna Fedec, analyst@tradingeconomics.com
3/10/2008 7:13:37 PM