Economists at Canada's leading banks presented a cautiously optimistic outlook Thursday, suggesting many of the headwinds that have battered the economy are starting to ease.
"There's still some risks out there but I'd argue they're less significant than in the past and in that environment we should see some better growth numbers," Royal Bank of Canada chief economist Craig Wright said after an event at the Toronto Region Board of Trade.
But while concerns about the euro zone crisis and the U.S. fiscal cliff have eased, uncertainty south of the border remains, along with nervousness over the conflict in Syria and the future of the housing sector.
With consumer spending improving and the housing market appearing set to cool, not collapse, there are signs of an upswing.
"The economies that will succeed going forward are the ones that can attract private capital and talented people to join their economies to slow down the impact of an aging population," said National Bank of Canada economist Stéfane Marion.
Mr. Marion said Canada, and Ontario in particular, need to become more competitive in their manufacturing when compared with jurisdictions like Mexico, which is seeing an influx of investment in the auto sector.
"I think there are ways to put policies in place to better leverage the North American framework to try to get a production process that is extremely competitive versus the rest of the world," he said.
While the outlook for Ontario is brightening for next year, Marion said the performance of the country's most populous province won't be "stellar."
Anything above 2 per cent growth for the advanced economies, he added, should be viewed as good news.
"From a cyclical basis, I think Ontario is well positioned going into next year; however, from a structural basis, don't be fooled," he said.
"We have a lot, a lot, of challenges."
Toronto-Dominion Bank raised its outlook for Canadian economic growth for the third quarter Wednesday to an anuual rate of 2.3 per cent in the July-September period compared with a June forecast of 2 per cent, saying consumer spending will be the driving force.
The bank still expects full-year growth will be 1.7 per cent in 2013 and 2.4 per cent in 2014.
RBC put growth for this year slightly higher, at 1.8 per cent, and 2.8 per cent next – figures Mr. Wright said are a bit above the consensus but "not particularly robust."
Economists agree that exports and business spending will have to pick up before the country sees more steady growth.
The Canadian economy grew by a rate of 1.7 per cent in the second quarter as flooding in Alberta and a construction strike in Quebec took a toll, and while most economists expect some bounce-back in the third quarter, the extent and timing remains uncertain.
The Bank of Canada estimated in July that the economy would grow by at rate of 3.8 per cent in the third quarter.