2020 Economic Outlook
2020 Economic Outlook
Projected Economic Indicators for 2020 (1)
GDP Growth
Inflation
Unemployment
Rate
Interest Rate
(3 mth T-bills)
Current Account
Balance/GDP (2)
Budget
Surplus/GDP (3)
Canada
1.4%
1.6%
5.8%
1.40%
(1.8%)
(0.7%)
U.S.
1.9%
2.0%
3.7%
1.65%
(1.8%)
(5.5%)
Euro Area
0.9%
1.1%
7.6%
ΝΑ
2.7%
(0.9%)
Canada
U.S.
Euro Area
☐
The Canadian economy is forecast to grow by 1.4% in 2020, decelerating from an expected 1.6% in 2019 and 2.0% in
2018. An easing in U.S.-China trade tensions has reduced downside external demand risks. Recent domestic economic
data flow has been soft, however, and the recent COVID-19 outbreak threatens restrain growth in China and disrupt global
supply chains. Labour markets still look solid, but household spending growth is still being restrained by already elevated
debt levels.
Soft domestic economic data in Canada, coupled with still-significant remaining go-forward external demand risks from
global growth deceleration, are expected to push the Bank of Canada to lower interest rates, following earlier cuts from the
U.S. Fed and other global central banks. We assume one 25 basis point cut in the overnight rate in Q2/2020.
The U.S. economy is forecast to grow by 1.9% in 2020, broadly in line with its long-run structural trend rate, following a
2.3% gain in 2019. The risk of further softening in the U.S. industrial sector lessened with the signing of the phase 1 trade
agreement with China in January 2020. The recent outbreak of the COVID-19 has threatened to disrupt global supply
chains and could temporarily slow growth. However, labour markets remain solid and consumer spending/confidence
remains elevated.
In 2019, the U.S. Fed carried out a series of "insurance cuts" despite a still relatively solid economic backdrop. The moves
to lower the target range were framed as being preemptive to hedge against potential future slowing amid benign inflation
trends. We continue to expect the Fed to remain on the sidelines in 2020.
Euro area GDP growth is expected to slow to a 0.9% pace in 2020 following a 1.2% increase in 2019. Some of the slowing
reflects the impact of slower global growth on the industrial sector and political uncertainty, particularly with respect to
establishing the post-Brexit trade agreement.
Inflation remains low even in the midst of several monetary policy easing measures including asset purchases and
lowering monetary policy rate. We are not expecting further adjustments in ECB monetary policy in 2020 despite the
recent change in leadership at the central bank.
(1) RBC Economics Research as of November 8, 2019 and reflect forecasts for calendar 2020. (2) RBC Economics Research, IMF WEO. (3) IMF Fiscal Monitor (October 2019), RBC Economics Research.
33 ECONOMIC BACKDROP
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