Canada recession may recover in late 2009: poll

Wed Apr 8, 2009 12:52pm EDT
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By Ka Yan Ng

TORONTO (Reuters) - The Canadian economy is expected to worsen in the first half of 2009 but may start seeing tentative signs of recovery as early as the third quarter, a Reuters poll showed on Wednesday.

Economists were more pessimistic in their outlook for the economy through 2009 and into 2010, compared with the previous quarterly survey in January, slashing forecasts for gross domestic product, the unemployment rate, housing starts, and the Bank of Canada's lending rate.

The survey of over 20 economists, conducted in the days after the end of the first quarter, forecast the economy will shrink by an annualized 2.5 percent this year -- more than twice the 1.1 percent contraction predicted in the January poll.

The gloomier outlook follows dismal early data for the first quarter that has put Canada on track for one of its worst economic performances in history. The median forecast is for a 6.1 percent contraction, which would follow a 3.4 percent downturn in the fourth quarter of last year.

The steepest quarterly decline on record for Canada was a 5.9 percent drop in the first quarter of 1991.

All economists surveyed said the economy would contract in the first three months of 2009, and all but one said the economy would shrink again in the second quarter.

Canada should eke out growth of 0.5 percent in the July-September quarter before accelerating in each quarter throughout 2010, the survey showed. Economists pegged growth in 2010 at 1.9 percent.

"I think that this particular recession certainly has some significant depth to it but is also likely to be of a protracted nature, so you're not going to get that big galloping recovery in 2010," said Stewart Hall, a strategist at HSBC Securities.   Continued...

<p>People walk by a Bay Street sign inside the financial district in Toronto October 10, 2008. The Toronto Stock Exchange's main index tumbled 700 points on Friday afternoon, as commodity stocks slid along with underlying prices on deepening fears the world economy will go into recession. REUTERS/Mark Blinch (CANADA)</p>