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Interview—World Outlook: Winter 2013

, Principal Economist, answers questions about the latest World Outlook report. Problems with the player? Download the mp3 file


What can you tell us about the state of the European economy?

It is pretty grim right now. Most of the countries in southern Europe are in recession. Even the German economy which is the strongest economy in Europe, it’s not growing very fast either. The problem is that these countries have is they are caught in a vicious circle because the IMF and other international organizations insist that they cut back on spending and that pushes up unemployment and the country growth weakens and they don’t generate the revenue to pay down the debt. Now the plus side is that the European Central Bank last August said it will do whatever it takes to keep the euro together and so far that’s happened. So the euro probably will survive but there’s going to be years of sluggish growth before this crisis ends.

What does the current political stalemate in the United States mean for the global economy?

It’s not very good. The thing in the US is that the housing market is starting to come back; investment spending is starting to pick up. Everything is set to go but the Congress and the president can’t agree on how to solve this deficit problem. So as a result, as of March 1, last Friday, there were significant cuts made in government spending over the next few months and this is probably going to weaken growth. Now, the US is doing a lot better than Europe, there is no doubt about that, but because of a failure to agree on ways of solving these trillion dollar deficits, it is holding back growth in the US and the global economy.

What about Canada?

Canada, we are not expecting very high growth in Canada as well. Partly it’s because of what is happening in the States of course, the United States is Canada’s biggest export market so when they are not growing very fast, that affects our exports but the other thing in Canada is that the federal government has been cutting back on spending because we have our own deficit problems here although not as bad as the situation in other countries. And a lot of provinces are cutting back because of provincial deficits so we are looking for modest growth in the 2% range in Canada over the next couple of years.