US economic turmoil to affect Canada - economist

02 October 2008 21:58  [Source: ICIS news]

TORONTO (ICIS news)--Canada’s economy will experience a slowdown in financial growth during the next 18-24 months, but it will not be a severe as in the US, an economist said on Thursday.

Even so, turmoil in US financial markets will have far-reaching implications for Canadian industries, said Paul Ferley, assistant chief economist for the Royal Bank Financial Group.

Speaking at the 13th annual Canadian Plastics Resin Outlook Conference Ferley said long-term effects of US market disruption will include permanently higher costs of capital due to increased pricing of risk.

Also, there will be more regulation in the US, and to a lesser extent in Canada, he said.

North American companies will see impaired balance sheets, resulting from recapitalisation and de-leveraging, he said, which itself was expected to drive up the cost of capital.

Overall, the Canadian economy will weather the financial storm, he said. Commodity prices will trade lower, but will remain at historically high levels.

Ferley added that favourable terms of trade will be maintained in Canada during the next 18-24 months.

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By: Landon Feller
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