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Blog by Kevin Wong

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Canada Unlikely to Enter Recession: CIBC World Markets

Next year won’t be the best ever, from an economic point of view, but chances are Canada will not fall victim to a recession as many other nations are likely to around the globe, according to CIBC World Markets.

They suggest that, while the economy will slowdown in 2012, there is a likelihood that the continued low interest rate environment will do much to buoy the economy, and keep it from sinking into recessionary territory.

"As an open economy, Canada can't help but feel the disappointment of a barely half-speed world," says Avery Shenfeld, chief economist at CIBC in a new economic forecast.  "Excepting Europe, we're not destined for recession, but global growth will barely top three per cent next year, and 2013 won't be a whole lot better, well below the bounteous five per cent pre-recession pace."

They expect that job levels in Canada will remain roughly the same through 2012, which makes the economy that much more dependant on these low interest rates and the consumer spending that will be encouraged to help move the economy along. This suggests too, as many have already said, that interest rates will stay at these low levels for many months to come.

"2012 is on tap to be a lacklustre year for the Canadian economy. While the Bank of Canada had earlier warned about rate hikes in 2011, the next leg of a tightening cycle looks unlikely to be required before 2014, as the economy continues to need exceptionally low rates to stay above water."

Shenfeld also points to business spending as another necessary mechanism to keep the wheels of the economy moving. “Spending in energy, aluminum smelting, shipbuilding facilities and other private sector megaprojects will provide at least some antidote to the retreat underway in public sector capital spending as the recession's stimulus is wound down."