The Canadian economy is expected to continue its recovery and maintain solid growth in 2004 and beyond, according to an annual survey of leading Canadian economists conducted by Watson Wyatt.

The 23rd Annual Watson Wyatt Survey of Economic Expectations finds that Canadian Gross Domestic Product (GDP) is expected to grow at a rate of 3.0 percent in 2004, down from 3.1 percent predicted last year. In comparison, participants foresee a strong rebound south of the border this year, with the U.S. GDP growing an impressive 4.1 percent. Over the long-term economists expect that both countries will see a rate of 3.1 percent.

A low inflation forecast of 1.8 percent for the current year and 2.1 percent for the long-term -- down significantly from last year's forecasts (2.5 percent for the short and long-term) -- further contributes to the rosy outlook, signalling confidence in the Bank of Canada's monetary policies, as well as continued economic stability.

The Canadian dollar is also expected to remain strong. After a significant rally in 2003, when it reached well above last year's predicted level of $0.65 versus the U.S. dollar, forecasts call for the dollar to stabilize at current levels of $0.78 U.S. for the next five years, then to increase to just over $0.80 U.S. over the long-term.

"The survey results reaffirm that the Canadian economy is on course for prosperity, as experts anticipate an improvement in economic indicators almost all across the board," said John Gilfoyle, National Practice Director, Investment Consulting at Watson Wyatt. "Unlike last year when the optimistic stance was somewhat offset by expectations of declining productivity and living standards, the picture this year is extremely positive."

According to the survey findings, Canadian labour productivity is expected to hit 2 percent for the long-term, up from 1.7 percent in the 2003 survey. This optimism is critical to Canada's future living standards. An improvement in long-term productivity is likely to help offset wide-scale labour shortages anticipated in the 2010's. Additionally, respondents see the unemployment rate decreasing from 7.4 percent in 2004 to 6.8 percent for the long more