New Ontario Economic Forecast 2018 – 2020
VANCOUVER, July 10, 2018 – Ontario’s economy is entering a slowdown that’s expected to last through 2020 according to the latest forecast from Central 1 Credit Union (Central 1). Less residential investment spending, restrained consumer spending, range-bound trade performance, and slower population growth, combined the effects of U.S. trade restrictions which have the potential to create considerable damage to the provincial economy.
Ontario’s export market is highly dependent on the U.S., which receives 82 per cent of goods exports, and 30 per cent of goods exports are concentrated in auto and related manufacturing. U.S. trade restrictions have the potential to create considerable damage to the provincial economy. Tariffs on steel and aluminum imports from Canada have come into in effect and the U.S. is threatening tariffs on autos. NAFTA negotiations have not reached a deal and look to extend into 2019, and upcoming elections make the outcome far from certain. Beyond North America, U.S. trade relations with China, the EU, and others are becoming more strained and escalating, which could lead to substantial negative consequences for the global economy if rhetoric turns into actions.
“Ontario’s export market is highly dependent on the U.S., and U.S. trade restrictions have the potential to result in an industry recession and weaker provincial growth,” said Edgard Navarrete, Regional Economist with Central 1. “An outright recession in Ontario’s economy is possible if trade tensions turn into a global trade war.”
While an immediate recession isn’t indicated, trade policy risks are rising with the potential for a substantial reduction in growth, and the extreme, an outright recession. Much depends on U.S.-China trade relations and whether those two largest global economies escalate trade tensions or not.
Growth in real GDP is expected to slow to 2.1 per cent in 2018 – compared to 2017’s estimated 2.8 per cent – with nominal GDP growth at 4.4 per cent in 2018. Slower personal consumption spending and a decline in residential investment spending are the reasons for 2018’s slower growth performance.
Business investment spending is expected to edge up, though this is a notable forecast risk. Government capital spending and spending on current goods and services will post slightly faster growth. The trade sector won’t contribute to growth, with only marginally higher exports and imports.
“This outlook to 2020 is subject to considerable uncertainty in light of current trade issues playing out in North America and elsewhere,” said Navarrete. “This forecast presumes the status quo in trade policy and in provincial government fiscal and economic policy. We can expect changes under the new provincial government which haven’t been formalized yet.”
Highlights from the report:
- Slower economic growth through 2020
- Trade tensions mount
- Tariffs reduce production, raise costs
- Forecast risks higher than usual
Read the full report: Ontario Economic Forecast 2018-2020
About Central 1
Central 1 is a preferred partner for financial, digital banking and payment products and services – fuelling the success of businesses across Canada. With $19.5 billion in assets, we leverage our scale, strength and expertise to power progress for more than 300 credit unions and other financial institutions, enhancing the financial well-being of more than 3.4 million. For more information, visit www.central1.com.
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Central 1 Credit Union
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