Tuesday, March 1, 2016

Forecasting 2016

The year 2015 was marked by consecutive falls in real monthly gross domestic product (GDP) from January to May and then in September and October. Economic growth resumed in Canada in November. 

There are two main reasons behind this poor performance of the economy: the collapse of oil price and the depreciation of our currency. 

Is the fear about a recession definitively over now?

Real GDP Year-over-Year Growth Rate, Forecast, Canada, 2016

The above forecasts indicate that for this rest of the year, the economy will perform better than in 2015. The average GDP growth rate will be 1.03%. This estimate is lower than the 1.7% from the  projections released last month by the International Monetary Funds. It is closer to the estimates of the Bank of Canada predicting growth rates of .8% and 1.4% respectively for the first and second quarters of 2016.

Due to the drop in oil price we have been observing, I predict inflation rate will be about 1%.

Year-over-Year Inflation Rate, Forecast, Canada, 2016

The Bank of Canada's forecast for inflation rate for the the first and second quarters are respectively 1.5% and 1.4%. 

All is pointing out that the fear about a recession is over. 

The dataset I have used are here