The worst for GDP growth is not quite behind us but the economy’s prospects look better than they did a few months ago. Measures to boost existing oil pipeline capacity will help to offset still weak external demand in 2020, while consumption will be supported by rising house prices and a lower tax burden. We now expect GDP growth to be unchanged at 1.7% in 2020. In 2021, a pick-up in global GDP growth as well as a new pipeline will drive a more marked acceleration to an above-consensus 2.3%. That will close the output gap and, with the policy rate still far below the Bank of Canada’s estimate of the neutral rate, put interest rate hikes back on the table.
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