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April 2017 Annual Reassessment of Potential Output Growth in Canada

Andrew Agopsowicz, Bassirou Gueye, Natalia Kyui, Youngmin Park, Mohanad Salameh and Ben Tomlin ()

Staff Analytical Notes from Bank of Canada

Abstract: This note summarizes the Bank of Canada’s annual reassessment of potential output growth, conducted for the April 2017 Monetary Policy Report. Potential output growth is projected to increase from 1.3 per cent in 2017 to 1.6 per cent by 2020. The lower estimate for potential output growth in the near term (relative to the 2016 assessment) largely reflects distinctly weak business investment over 2015 and 2016, as well as reallocation costs associated with the adjustment to lower oil prices. However, potential output growth improves throughout the projection as investment is expected to pick up, with an increasing share in productivity-enhancing machinery and equipment. Population aging will act as a drag on potential output growth, with a small offset coming from higher levels of immigration. An analysis of alternative scenarios suggests a range of potential output growth from ±0.3 percentage points in 2017 to ±0.5 percentage points in 2020.

Keywords: Labour markets; Potential output; Productivity (search for similar items in EconPapers)
JEL-codes: E E00 E2 E22 E23 E24 E37 E6 (search for similar items in EconPapers)
Pages: 23 pages
Date: 2017
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Handle: RePEc:bca:bocsan:17-5