TORONTO, Dec 19 (Reuters) - The Canadian economy has fallen into a recession and will not see any growth in 2009, but the slowdown is not expected to be as severe as in other countries, Royal Bank of Canada (RY.TO) said on Friday.
A report by RBC Economics said the Canadian economy is about to go down a “rocky road” as the global economy falters and prices for key Canadian commodities slide.
“We expect the slowdown in Canada not to be as severe as in other countries since the imbalances plaguing other countries are more pronounced,” Craig Wright, chief economist at Royal Bank of Canada, said in the report.
According to RBC, Canada’s economy will contract in the fourth quarter of 2008 and the first quarter of 2009, a scenario that fits the description of a recession.
The study said the combination of falling incomes, tighter credit conditions and a rising debt-to-asset ratio is expected to curb consumer spending in 2009.
RBC said Canada’s unemployment rate will climb as high as 7.4 percent in 2009.
Last week, the Bank of Canada cut its key overnight rate by 75 basis points to 1.75 percent and said for the first time that Canada is entering a recession.
Several of Canada’s other big banks have already forecast that Canada will fall into recession in 2009.
Canada’s economy narrowly avoided a recession in the first half of 2008 as gross domestic product grew 0.3 percent in the second quarter after shrinking 0.8 percent in the first. (Reporting by Frank Pingue; editing by Peter Galloway)