UBS strategists are caving in to all the doom and gloom, slashing their economic growth forecasts to recessionary levels after holding out for a better year in 2009.
For the United States, they now see three consecutive quarters of decline, with 2009 growth falling to just 0.3 per cent from a relatively upbeat previous forecast of 1.2 per cent growth next year. Globally, they see growth falling to 0.6 per cent from 2.2 per cent previously – which UBS says is the IMF's definition of a global recession.
Canada isn't going to escape, and should fall into recession with declines in the fourth quarter of 2008 and the first quarter of 2009. But at least they see a bright side here.
“An important point of distinction for the Canadian economy is that, for the first time most can surely remember, the underpinnings are sound going into a downturn,” UBS said in a note to clients. “Specifically, consumer debt service ratios are historically only average, the budget is in balance with debt ratios less than half US/European levels. Accordingly, the economic risk in Canada is far lower, and there is more ammunition available to undertake countercyclical initiatives, if so desired.”
