Economy slowing, interest rates to stay low for longer, say Scotiabank analysts

OTTAWA – Scotiabank has shaved its forecast for Canada’s economy in the next two years to sub-two-per-cent growth, a rate it says will keep interest rates low until 2014.

In a new forecast, Scotiabank economists Derek Holt and Dov Zigler say the economy will likely average 1.9 per cent growth this year, and 1.8 in 2013.

That’s slightly below their previous call and south of the Bank of Canada projections.

At such low rates of growth, the Canadian economy will actually be building spare capacity in the next couple of years rather than closing the gap and returning to full capacity, as the central bank expects.

As well, they say the unemployment rate will show virtually no improvement in the next two years.

The economists note that around the world conditions have worsened, as have hopes for next year.