Econ4490 - Forecast
Econ4490 - Forecast
FORECASTING
ECON4490 - T12
Seth, Heena, Ayesha
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AGENDA
Variables of interest
Global Outlook
Geopolitical Uncertainties
Canadian Outlook
Global economies
Vector Autoregressive Model
Growing Role of Expectations
Forecasting
Policy Recommendations
Risks
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VARIABLES OF INTEREST*
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GLOBAL OUTLOOK
Risk of Global Recession Rises Amid Simultaneous Rate Hikes around the globe- World Bank
Gas prices exert a downward pressure in short run but upward pressure prevails as production cuts by OPEC +
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CANADA’S TRADE PARTNERS ?
UNITED STATES
• Growth revised up and net exports rose
• Canadian trade surplus widened
China
• Trade growth increased imports by 9.8%
• Real-Estate crisis fueling trade deficit
• China’s Economy Losing Momentum
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GEOPOLITICAL UNCERTAINTIES
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CANADIAN ECONOMY
PRESE
• Phase ofNT
economic slowdown
• Cautious Consumer Behavior
PROJECTIO Sources: Statistics Canada and Bank of Canada calculations and projections
* Numbers in parentheses are from the projection in the previous Report.
CANADIAN ECONOMY
PRESE
• Phase ofNT
economic slowdown
• Cautious Consumer Behavior
PROJECTIO
• Canadian inflation is expected to return to the target byNS
2025.
• GDP growth is expected to be modest most of 2024. Sources: Statistics Canada and Bank of Canada calculations and projections
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EXPECTATIONS
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SOURCE:
IMF
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Firms still plan to raise prices more than usual...
Source: BoC
Source: BoC 12
Growth Outlook: Stable and Slow
• GDP will move up to 1.6% in 2024 then
2.4% in 2025, settle again close to 1
percent.
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RISKS.....
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POLICY RECOMMENDATION
• Bank of Canada should maintain the interest rates for the next year and increase it by
25 basis points at the end of first quarter 2024
• A restrictive monetary stance is considered likely to move inflation back toward the target by
the end of 2025
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DATA SOURCES:
THANK YOU
FOR LISTENING
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Seth, Heena, Ayesha
ECON4490 - T12
APENDIX
how is the trade balance doing and what is expected to happen in the coming year?
look at the economic conditions of china and us. this will give and idea on what will be the outcome for
canadas trade as well. For instance China is doing bad and this could be a trigger for prices changes in
canada.
find points to tie up to the policy recommendations. like for example, the price of the oil is predicted to
stay high throughout 2024 and this will increase the headline inflation rate but the core is forecasted be
lower and stable, the interest rate of the bank is currently at 5% and looking at the above scenario, there
could be a reason to bring down the interest rate a bit lower in the next Quarter since there are concerns
about economic growth, employment, and potential negative impact of high interest rates on borrowing
and spending.
but at the same time If the bank believes that the high headline inflation is temporary and that core
inflation will remain stable, it may choose to maintain the current interest rate while providing guidance
on its future stance.
• 1.7% increase in imports from the U.S. (growing demand for U.S. goods
in Canada)
• Widening trade surplus with the United States for the third consecutive
month, reaching $11.7 billion in September.
• Widening trade deficit from $8 billion to $9.7 billion in the same month Source: BoC
(Canada is importing more from China than it is exporting)
A weak Chinese real estate market will affect sectors that export goods and services to China.
MODEL AND WHY THE MODEL?
• Exploratory Examination
• Identification of Components
• Diagnostic Tests
• Establishment of Model Order (p, d, q)
• Model Adequacy
• Tests for Residuals
• Multiple Model Evaluations
• Out-of-Sample Estimation
• Forecast
• Iterative Refinement
EVIDENCES