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Briefing highlights

  • The Canadian dollar in 2037
  • Markets at a glance
  • U.S. consumer prices flat in November

Outlook for the loonie

If you’re still alive in 2037, the Canadian dollar could still be worth just 75 U.S. cents.

That forecast is among new long-term projections by Capital Economics, which doesn’t paint the brightest picture for Canada over the next 20 years, unless you happen to be a borrower or stock investor.

Capital Economics looked at three time frames: 2018-22, 2023-27 and 2028-37.

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It pegged the loonie at 75.2 U.S. cents by the end of each of those three periods, largely because of oil prices, to which the currency is traditionally tied.

“That may sound low to some people given that the exchange rate has averaged 83 cents in the past two decades,” senior Canada economist Stephen Brown said after the recent report was released.

“The logic is that the past 20 years have been a bit of an anomaly due to the rise of China, which boosted commodity prices, particularly oil,” he added.

“Our forecast is, therefore, that oil prices will remain near their current levels in real terms (on average, at least), thereby preventing a meaningful appreciation in the loonie (again, on average).”

Among the other projections from Capital Economics:

1. Canada’s economy will expand during those three periods at an average pace of 1.8 per cent, 2 per cent and 1.9 per cent, respectively.

2. Unemployment will average 6.5 per cent throughout.

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3. Wage gains will perk up by 2.6, 3.2 and 3.4 per cent.

4. The Bank of Canada’s benchmark overnight rate will rise to 3 per cent in 2023-27, and hold there for the following decade.

5. Inflation will average 2 per cent throughout.

6. The S&P/TSX Composite Index will end 2018-22 at 17,813, 2023-27 at 25,204 and 2028-37 at 47,693.

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