The Bank of Canada predicts some setbacks to Canada’s economy because of problems in the Japanese automotive industry, but growth this year will still be strong, bank Governor Mark Carney said on Wednesday.
Carney said shutdowns of factories by Japanese automakers and reduced demand by Japan for Canadian exports should cut Canada’s gross domestic product by one-half percent in this fiscal quarter.
Carney said the Canadian economy is also hampered by the strong Canadian dollar, which makes the country’s exports far more expensive. But he hopes Canadian businesses can use the strong dollar to buy machinery from foreign countries to make Canadian industry more competitive.
Since the beginning of the 2008 recession, less than 60 percent of Canadian manufacturing plants have acquired new machinery, while about 90 percent of U.S. plants have upgraded.
Carney told a news conference here that the Canadian economy will grow at a 2-percent annualized rate in the April-June period following a 4.2-percent expansion in the first quarter.
Gross domestic product will grow at a 2.7-percent pace in the second half of 2011, Carney said. He added that the bank expects the Canadian economy to reach its pre-recession strength in 2012, prompting speculation that the bank will raise its benchmark lending rates in June, after the May 2 federal election.