Global policy-makers face long ‘to-do’ list to fix economy: CIBC

Troubled global economies and tapped out domestic consumers will weigh on Canada’s economy this year, CIBC warns in its latest forecast.

“The global economy hasn’t fallen off a 2008-style cliff, but it’s been too close to the precipice for investor comfort,” said Avery Shenfeld, chief economist at CIBC. “There’s a long ‘to-do’ list for policy makers that will have to be completed to repair the engines of growth. 


Some emerging markets are on the boundary of a hard landing, Europe is mired in recession, and the U.S. is moseying along on its half-speed recovery.”

CIBC economists have a firm to-do list for global policy-makers to spur growth:

* * Portugal 2 [bailouts], Ireland 2

* * Greece 3 or managed exit

* * Cyprus bailout

* * Spanish sovereign bailout

* * Other European bank equity infusions

* * Austerity Lite

* * Increased European Stability Mechanism

* * ECB bond purchases or QE

* * Chinese monetary and fiscal stimulus

* * Strong yuan

* * U.S. softening of fiscal cliff

CIBC’s latest forecast predicts Canada’s economy will grow 2.1% this year, behind the slowing global rate, as exports weaken and consumer demand dwindle, threatening jobs.

“That could dent job creation in Canada, as hiring has quickened recently on the bet that external demand will improve,” sayid CIBC deputy chief economist Benjamin Tal. “Almost all of the job creation seen in the last six months came from the tradeable sector, namely manufacturing and natural resources that depend heavily on foreign demand.”

The economist said the effect of ultra-low interest rates on spending in Canada may be exhausted to the point of diminishing returns.

“Years of free-flowing credit in Canada have seen Canadians overshoot by a wide margin what could be considered “normal” consumption relative to population trends,” Mr. Tal said. “So after gorging at the table of plenty for several years, Canadian consumer appetites may already be satiated.”

Meanwhile, CIBC dropped its global economic forecast to a projected 3% GDP this year, outlining the ‘to-do’ list for global leaders.