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The Resource for the Global Finance Profession

Canadian Growth to Pick Up?

  • By Andrew Deichler
  • Published: 2013-04-02

Canada’s economy, which lagged in the second half of last year, is expected to pick up, according to a new report from the Organization for Economic Co-operation and Development (OECD).

The OECD estimates that Canada, which saw just 0.6 percent growth in fourth quarter 2012, grew 1.1 percent this quarter and will expand 1.9 percent next quarter. The projection has Canada ahead of most European countries, but behind the U.S. (3.5 percent in Q1 and 2 percent in Q2), Japan (3.2 percent and 2.2 percent) and Germany (2.3 percent and 2.6 percent). The G7 countries are expected to grow an average of 2.4 percent and 1.8 percent in Q1 and Q2.

Karl Schamotta, Senior Market Strategist for Western Union Business Solutions and president of AFP of Canada-Calgary, told AFPC that exports are likely to exhibit strength in the third and fourth quarters, primarily driven by a steady rise in U.S. consumption. “This should help to support consumer sentiment and act to temporarily stabilize the housing market in Canada,” he said. “However, flatlining crude prices and the persistent competitiveness gap will continue to exert drag, most likely leading to a broader psychological reassessment of Canadian growth prospects by the end of the year. This will probably have a larger effect on financial valuations than on the real economy itself, so the OECD’s forecast seems relatively sensible.”

Nevertheless, most treasuries are vulnerable to changes in the financial markets, Schamotta added. “Many treasurers are skeptical of the rallies being seen in the equity markets—many are looking the gift horse in the mouth, and they aren’t liking what they see. This is driving corporates to ensure that they have uninterrupted access to liquidity, to protect against economic weakness, and to position for currency volatility,” he said.

New initiative

One initiative that could help spur some growth in Canada in the coming months is the Start-Up Visa program, which launched Monday. The program encourages foreign entrepreneurs to come to Canada, attain permanent resident status, launch new businesses and create jobs.

In a statement, Citizenship, Immigration and Multiculturalism Minister Jason Kenney said Canada is “open for business” to new entrepreneurs. “We are actively recruiting foreign entrepreneurs— those who can build companies here in Canada that will create new jobs, spur economic growth and compete on a global scale—with our new Start-Up Visa,” he said.

Interested entrepreneurs must secure a minimum investment of either $200,000 from a designated Canadian venture capital fund or $75,000 from an approved Canadian angel organization. Citizenship and Immigration Canada (CIC) enlisted the help of the Canadian Venture Capitalist Association and the National Angel Capital Association to identify investors for the program. A full list of designated investors is available on the CIC website.

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All rights reserved.

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