Indo-Canada Chamber organized an economic briefing session in collaboration with RBC Royal Bank where Paul Farley, the assistant chief economist of the bank made a presentation on Global, U.S. and Canadian Economic Outlook: Growth to Strengthen as Downside Risks Ease.

Mr. Farley analysed the emerging global economic scenario and made the following observations for the near-term:

Strong business investment, rising U.S. demand, modest gains in consumer spending, and accommodative Bank of Canada policy are expected to help strengthen growth next year.  In addition, strong demand for natural Resources is a benefit for Canada though growth is still largely dependent on sustained U.S. recovery. The recovery in Canada since the recession has generally been moderately stronger than in the U.S.

He said, the Canadian economy has benefited from strong, albeit slowing, demand from emerging markets, particularly in Asia, for various natural resources. Though commodity prices have recently moved lower, they have remained, and are expected to continue to remain, historically high.

These factors are expected to be beneficial to exports and business investment, particularly in 2014, though with still high household debt both limiting consumer spending and weighing on residential investment while fiscal restraint will curtail government spending. Export growth has under-performed relative to U.S. growth though the recent depreciation of the Canadian dollar is expected to help close that gap.

Mr. Farley said, economic growth in Canada is expected to be sufficiently strong to put further downward pressure on the unemployment rate. Though the unemployment rate has moved lower, there remains sufficient slack in the economy to keep core inflation below target through the forecast.

To sustain growth, the Bank of Canada is expected to remain on the sidelines until 2015 reflecting modest growth and the absence of inflationary pressures. Bond yields to rise as financial markets anticipate eventual central bank tightening in both Canada and the U.S.

The Canadian dollar to remain historically high though on a depreciating trend reflecting the recent weakness in export growth.

On the subject of trade between Canada and India, he said, the two-way trade between India and Canada has been steadily rising though this is occurring from still very low levels. Canadian exports to India are skewed towards natural resources with aircraft being the only exception among the top six items. Canadian imports from India are more diversified. Strong business balance sheets and strengthening confidence is expected to contribute to a strengthening in business investment.

There was a large jump in investment by India in Canada in 2008 that was in part related to a large purchase of a Canadian steel operation. However, the dollar amounts were small relative to Canada’s bilateral investment with other countries.

In addition, the Assistant Chief Economist of RBC Royal Bank also said that the advanced economies are expected to take the lead in boosting growth. In particular, the recovery in the U.S. is expected to boost activity among both advanced and emerging economies. Although in this regard, he cautioned that though annual U.S. growth in 2013 at an expected 1.9% was disappointingly modest, the quarterly numbers point to a strengthening trend through the year.  Strengthening growth among advanced economies in 2014 is expected to be relatively broad based though with Japan being an exception

While discussing the emerging economies, Mr. Farley said higher U.S. bond yields are raising concerns about higher funding costs to emerging economies which is weighing on the currencies of those economies. He also said that the strengthening activity among emerging economies may be restrained by relatively steady growth in China.

Brij K. Sharma, ICCC’s Director for Trade, SME & Sponsorship, in his welcome remarks emphasized the significance of organizing such informative sessions with members and stakeholders of the Chamber. He said, “In today’s globalized environment, it has become imperative for our members to take economic decisions based on a proper understanding and analyses of key emerging trends. Mr. Paul Farley’s observations will go a long way in aiding our members take those informed decision.”

Mr. Imtiaz Seyid, Vice President, South Asian & Middle East Markets, RBC Royal Bank, and a former director of ICCC, introduced the speaker. Mr. Naval Bajaj, President, ICCC, also spoke on the occasion.