MONTREAL - The bad news you already know. Canada faces a slow slog economically for the next couple of years, maybe longer, as it fights the headwinds generated by a stubborn global debt crisis.
What you may not know is that in spite of this, Canada is one of the more fortunate countries on Earth in terms of its prosperity and future prospects.
This argument comes from Sherry Cooper, chief economist of the BMO Financial Group – better known as the Bank of Montreal – and she laid out her case persuasively yesterday to a Montreal business group.
“In my opinion, Canada will continue to be a global growth leader,” said Cooper, citing a long list of growth opportunities, from investment inflows to improved competitiveness.
Admittedly, the case for good cheer faces headwinds of its own. Over the past several months, this country has been battered by an economic slowdown and market crash similar to those in the U.S.
But uncomfortable as this has made many of us, the fact is that few Canadians would want to swap places with Americans, Britons or even Germans, whose country is Europe’s economic powerhouse, but where growth is grinding to a near-halt.
All these countries suffer from one or more crippling handicaps that we’ve been lucky enough to avoid in Canada.
Americans are enduring the drawn-out agonies of a housing bust that savaged the wealth of many families and badly damaged the banking system. Now extreme political partisanship is stifling any vigorous effort to stimulate growth.
Europe has its own problems, with widespread housing busts and damage to banks’ solvency, exacerbated by the exposure of enormous unacknowledged debts run up by Greece, the weakest member of the eurozone.
As in the U.S., political gridlock has delayed any effective action to bail out Greece, in this case because 17 sovereign nations must agree unanimously on steps to rescue their shared currency.
With Europe’s government-debt crisis sapping confidence in banks (which have big holdings of government bonds), credit markets are beginning to freeze up, slowing the region’s economy to a near-halt. Some think Europe is already in recession.
By comparison, Canadian home values are still rising briskly, housing construction (which has collapsed in the U.S. and much of Europe) continues to power along and economic growth, while slowing, is nowhere near falling into a recessionary slump.
There’s no struggle to control soaring government debt, as in Europe, the U.S. and Japan, because Canada entered the recession with a very low debt burden. This increased during the recession, but only to a modest degree, making it far easier to rein in today’s deficits.
One striking comparison captures much of this country’s relative prosperity.
In the U.S., a very high jobless rate has inched down only marginally in the 12 months, to 9.1 per cent from 9.6 per cent. Meanwhile in Canada, unemployment was relatively low 12 months ago at eight per cent, and has since fallen sharply to 7.1 per cent.
Some of Canada’s good fortune stems from dumb luck. Our huge resource endowment enables us to profit mightily from the high prices of resources ranging from petroleum to copper to wheat.
But there’s more to it, Cooper noted yesterday. Canada’s financial regulation is far better than most, leaving us with a banking sector widely regarded as the most solid in the world. That’s a key asset for economic growth.
Canada’s high-valued currency – which admittedly can squeeze export profits – is also being used to leverage economic growth. A high loonie makes it cheaper to import the best high-tech industrial equipment and the smartest minds from other countries.
An immigration system that has long focused on attracting valuable skills is serving this country well, as is a quality of life that enables Canada to attract large numbers of immigrants, which creates a growing market.
Even provinces like Quebec, where soaring tax rates and a squeeze on government services is forecast to contribute to a slight rise in unemployment next year (to an average of 7.6 per cent from 7.5 per cent this year), the outlook isn’t too bad, Cooper says.
The Charest government’s focus on controlling government debt is smart, she said. Quebec should come through the current soft spot in reasonable shape, and could do even better with an upgraded education system and a more welcoming atmosphere for immigrants, of which it now attracts very few.
jbryan@montrealgazette.com
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