VANCOUVER, B.C. – Ontario’s economy will see moderate growth into 2020, with support from below normal interest rates, firmer U.S. growth, a low dollar, high population growth, and a pickup in business investment and government capital spending, according to the latest forecast from Central 1 Credit Union (Central 1).
Growth over the next three years will be slightly slower than in 2017, due to a decrease in consumer and residential spending, but the provincial economy will remain robust overall.
“In 2018, we expect real gross domestic product (GDP) growth to slow to about 2.5 per cent from 2.8 per cent in 2017,” said Helmut Pastrick, Central 1’s Chief Economist. In 2019 and 2020, real GDP will come in at 2.4 per and 2.3 per cent, respectively.
This past year, key economic indicators for the province were mostly positive. Ontario saw employment up 1.7 per cent, unemployment below six per cent, and wages and salaries up 3.7 per cent in 2017. The impact of minimum wage increase – which will be rising to $14.00 on January 1, 2018 from $11.60 and rising again to $15.00 on January 1, 2019 – remains to be seen. Job growth is likely to slow slightly in 2018, while the unemployment rate slides lower.
Population growth through 2020 is expected to be the best three-year performance since the turn of the century, which will have a considerable impact on labour and housing markets.
Housing sales will be lower in 2018 versus 2017 due to tighter mortgage credit conditions and deteriorating affordability, but Central 1 doesn’t expect a crash any time soon.
“A housing market crash is unlikely without a global economic recession or geopolitical crisis – which is how housing cycles usually end – but nothing points to such an event within the next three years,” Pastrick said.
Without a recession, the most likely cycle-ending scenario would be a gradual softening caused by dwindling affordability and tighter credit restrictions. “The soft-landing scenario would take years to unfold, while the recession scenario could occur suddenly,” Pastrick said.
Uncertainty around the future of the North American Free Trade Agreement (NAFTA) is a potential threat to Ontario’s economy. If, for example, the U.S. decides to walk away from NAFTA entirely, the province’s manufacturing sector, and the economy as a whole, would suffer.
Highlights from the report:
- Healthy economic growth expected through 2020, despite slowing slightly
- Central 1 predicts job growth of 1.5 per cent and unemployment at 5.9 per cent in 2018
- Significant population growth ahead, with substantial impacts on labour and housing markets
- NAFTA outcome could have major implications for manufacturing and provincial economy
- Housing market expected to hold up, a crash not likely
- Global economic recession, financial crisis, or geopolitical crisis event pose largest risks to Ontario economy
Read the full report: Economic Analysis of Ontario 2017-2020
About Central 1
With offices in Vancouver, Mississauga and Toronto, Central 1 holds on balance sheet approximately $17.7 billion in assets. We provide wholesale financial products, trust services, payment processing solutions and direct banking services to about 300 credit unions and institutional clients from coast to coast.
In addition, Central 1 is the primary liquidity manager, payments provider and trade association for our 42 member credit unions in B.C. and 70 Ontario member credit unions. Our members represent a consumer-oriented, full-service retail financial system that collectively serves 3.3 million members and holds more than $124.5 billion in assets. For more information, visit www.central1.com.
Contacts
Heather Merry
Member & External Communications Manager
Central 1 Credit Union
T 604.737.5397 or 1.800.661.6813 ext. 5907
E communications@central1.com
Helmut Pastrick
Chief Economist
Central 1 Credit Union
T 604.737.5026 or 1.800.661.6813 ext. 5026
E hpastrick@central1.com
