CANADIAN ECONOMIC OUTLOOK

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP85T01058R000202740001-1
• Release Decision: RIPPUB
• Original Classification: C
• Document Page Count: 5
• Document Creation Date: December 22, 2016
• Document Release Date: November 2, 2009
• Sequence Number: 1
• Publication Date: April 19, 1985
• Content Type: MEMO

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V4
Memorandum for:
any questions, feel free to call me at
This outlodk is in response to your request
or unclassified information for the Canada-US
Interparliamentary Group Meeting. If you have
Sincerely,
19 April 1985
EURA
Office of European Analysis
RORA) 8S--4W7(0
Im"Alworm
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Canadian Economic Outlook
Canadian GNP growth is likely to be slightly below 3 percent in 1985,
down from the 4.7 percent achieved last year. Most of the slowdown in
growth will occur because of an expected deterioration in trade performance
-- last year expanding exports, particularly to the United States, provided
the major impetus to overall economic growth. In 1985, however, export
growth should moderate because the US economic boom is expected to taper
off. With three-fourths of Canadian exports going to the United States,
the trade balance clearly will suffer -- last year Canada ran a $15.3
billion merchandise trade surplus with the US alone. Moreover, we expect a
slight deterioration in the Canada's terms of trade, which will futher
worsen the trade figures. As a result the trade surplus in 1985 probably
will slip to $15.5 billion, down from $16.4 billion last year. Because
Canada will continue to run a large deficit in services, the current
account probably will be near balance this year.
Prime Minister Mulroney has said that deficit reduction will be one of
his government's economic priorities; any significant action to lower the
budget imbalance, however, is unlikely. Although the Canadian deficit for
fiscal year 1984-85 -- roughly $27 billion -- is larger as a percent of GNP
than the US deficit, leading Tories recognize that political realities will
make it difficult for the government to take major deficit cutting measures
in the budget that will be announced in late May
*All dollar figures are in US dollars.
EUR M 85-10076 25X1
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Another of Mulroney's priorities is attracting foreign investment which
he believes is necessary if the Canadian recovery is to be sustained.
Partly as a result of his actions, business investment, which was sluggish
last year, should pick up somewhat in 1985 but will continue to.remain well
below its pre-recession peak. Ottawa has introduced legislation to abolish
the Foreign Investment Review Agency (FIRA) and replace it with an agency
called Investment Canada. The new agency is designed to promote new
investment and will be less rigorous than the FIRA was in screening
proposals. Since the Tories took power last September, for example, Ottawa
has approved all foreign investment applications submitted to it.
Moreover, a recent change to the National Energy Program is designed to
encourage energy investment in Canada and removes the discriminatory
measures that were invoked against foreign firms by the previous Liberal
government
Inflation in Canada continues to remain under control. The consumer
price index increased by only 4.4 percent in 1984, a 13-year low, and
inflation is expected to moderate even further in 1985 to about 3.7
percent. The only threat of a new surge of inflation lies in the
increasingly unlikely possibility of a significant decline in the value of
the Canadian dollar -- a decline would push up import prices and rekindle
domestic inflation.
Although the Canadian economy will continue to grow in 1985, the growth
will not be sufficient to lower the unemployment rate significantly.
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Unemployment -- presently at 11.2 percent -- almost certainly will remain
slightly in excess of 11 percent for the reminder of this year.
Selected Economic Statistics
1984
.1985(Forecast)
GNP Growth
4.7%
2.9%
Consumer Price
4.4%
3.7%
Index
Unemployment
10.8%
11.3%
(End of Year)
Current Account
$1.5b
$0.4b
Budget Deficit
$27 b
$23 b
(as a percent
8.3%
7.9%
of GNP)
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- Branch file
- Division file
- Author
- NIO
- DDI
- ADDI
- OD/EURA
- Production
- IMC/CB
EURA/WE.
18Apr85)
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