Is Canada's economy set to surge? Here are banks' forecasts

The economy will grow at nearly double the average pace of the prior two years, predicts RBC Economics in a June 9 release and in its latest quarterly outlook report.

Even better, “Canada’s economy is on track to post its strongest gain in three years,” says Craig Wright, senior vice-president and chief economist at RBC, in the release. He adds, “While we don’t discount the risk of a slowdown resulting from the pending renegotiation of NAFTA or the expected cooling of the housing market, we remain confident the economy will continue to grow at an above-potential pace for the remainder of this year.”

Following solid GDP numbers for Q1 and hints of strength in March specifically, RBC Economics expects real GDP to grow 2.6% in 2017 and 2.1% in 2018, with B.C. leading the provinces; Newfoundland and Labrador will bring up the rear.

Read: Canada’s GDP solid, but housing risk requires action: OECD

The bank does forecast “a period of weakening” for the loonie, saying it will “end 2017 at 71.4 U.S. cents.” But that will change in 2018, it adds, “as the Bank of Canada starts to raise the overnight rate and oil prices continue to march upward.”

Read: More opportunity than risk for the Canadian economy

RBC isn’t the only bank with a sunny outlook: in a June 6 forecast, Scotiabank calls for “solid acceleration” of global growth, relative to last year, “with growth of 3.5% in 2017,” and it has increased its forecast for Canada’s growth for the year.

Scotiabank says, “We expect growth to stabilize around a 2% annualized rate for the remainder of the year, leading to annual growth of 2.6%, double the Bank of Canada’s estimate of potential output growth.” As such, it adds, that could “lead Governor Poloz to raise interest rates sooner than 2018Q2.”

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BMO and CIBC are also positive on GDP, with BMO calling for 2.7% real GDP growth in 2017 and CIBC expecting an uptick to 2.6% due to “momentum being carried forward.” CIBC also points to “upgrades to the profile for household consumption.”

TD Bank and Desjardins are optimistic but cautious.

In a May 31 release, TD says, “The Canadian economy roared ahead in the first quarter of the year,” and consumers and business spending were the main drivers. But, even though “boring old Canada saw a first quarter pace of growth that more than tripled what was seen for the U.S,” says TD, “there are reasons to expect a less exciting pace of expansion going forward. ” The bank expects another strong quarter, but no BoC action until 2018.

In a June 12 report, Desjardins says that Canada’s excess production capacity is being absorbed — a good sign. This means “upside pressure on prices could sharpen in the coming years,” leading the BoC to reduce stimulus. However, the bank also highlights “major uncertainties surrounding the economic outlook, and weakness in core inflation.”

Read: Predictions for Canada’s GDP in Q2