In mid-July, Bank of Canada Gov. Stephen Poloz affirmed that the country’s GDP contracted for a second consecutive quarter in the April–June 2015 period, technically meeting the definition of a recession. That is very bad news for Prime Minister Stephen Harper’s CPC government, which will be seeking re-election to a fourth consecutive term at parliamentary elections scheduled for October 19.

The economic news figures to complicate the CPC’s task of convincing voters that it deserves another term in office. Although the governing party appears to have fended off a challenge from the Liberals, the center-left NDP has enjoyed a surge in support, with recent polls of voter preferences showing Tom Mulcair’s party running neck-and-neck with the CPC or has taken a slight lead.

Based on the most recent poll numbers, even the third-place Liberals are still close enough to the leaders to create a glimmer of hope that they might score an upset victory. But barring a significant upward shift in the support for one or more of the parties over the next few months, the victor is very likely to fall short of claiming a majority in the expanded 338-member House of Commons.

Annual real GDP growth is forecast to slow to 1 percent to 1.5 percent in 2015.

In the event, the winner will need to secure the backing of at least one other party to achieve confirmation of a minority government, and it is debatable whether the Liberals or the NDP would deliver the necessary support for the Conservatives if they manage to eke out a first-place finish.

In The Spotlight

For that reason, predicting the outcome of the election is pure guesswork at this point. However, if Poloz’s forecast of an improved economic performance beginning in the third quarter proves to be too optimistic, the CPC’s hopes for a fourth term will evaporate and, with the NDP apparently making significant inroads in traditional Liberal strongholds in the east, a strong enough showing by Mulcair’s party to enable it to govern on its own, which remains a long-shot at this point, could become a realistic possibility.

In the near term, the government will be counting on more robust growth of non-energy exports, boosted by the further weakening of the local currency against the U.S. dollar and increased demand as the U.S. economy rebounds from the slowdown in the first quarter, to bring a quick end to the recession. With capital spending in the hydrocarbons industry projected to fall by 40 percent this year, annual real GDP growth is forecast to slow to 1 percent to 1.5 percent in 2015. And the pace of expansion could come in below the lower end of that range if growth of non-energy exports falls short of expectations.

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The PRS Group
About The Author The PRS Group
The PRS Group is a leading global provider of political and country risk analysis and forecasts, covering 140 countries. Based on proprietary, quantitative risk models, the firm's clientele includes financial institutions, multilateral agencies, and trans-national firms.




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