FXStreet (Mumbai) – In spite of the recent drop in the Canadian GDP, analysts at Fitch Ratings believe the economy will expand over this year as a whole but they also highlight some long-standing challenges the country is facing.
Canada’s GDP declined 0.2% in May, after contracting 0.1% in the previous month, Statistics Canada reported last week.
Key Findings from the Fitch report:
“A still-firm labour market and a US recovery starting in Q215 (exports to the US jumped 7.1% in June from May) hold out the prospect of a return to growth in 2H15, and we still expect the economy to expand over this year as a whole,”
“Nevertheless, weak outturns year-to-date illustrate how high commodity dependence, narrow diversification of trade partners, and the slow shift from consumption and construction to capital investment and exports as growth drivers carry risks to growth.”
“We think house prices are 20% overvalued in real terms nationally (the regional picture is mixed, with some markets showing signs of weakness and others performing strongly).”
“Mortgage rates have not responded significantly to the Bank of Canada’s easing. We think the authorities will remain proactive in addressing macro-prudential risks, making a soft-landing in the housing market possible.”
“Fiscal credibility and sound macroeconomic policies have supported Canada’s ‘AAA’/Stable sovereign rating, which we are due to review later in August.”
(Market News Provided by FXstreet)