Canada’s military spending will stimulate the economy without eliminating the recession, according to an analysis of Oxford Economics

Ottawa’s increased defense spending will stimulate the economy, but not enough to save it from a recession, according to a recently published report.

The updated analysis of Oxford Economics. Moreover, published on Wednesday, provides that Canada’s commitments in defense spending will increase the actual gross domestic product (GDP) of a tenth percentage point this year and next year.

This would increase growth to 0.9 % per year this year and 0.4 % in 2026.

Prime Minister Mark Carney announced last month his intention to achieve the objective of the Organization of the North Atlantic Treaty (NATO) in terms of defense. Therefore, security spending, set at 2 % of GDP, by the end of the year. Furthermore, The new commitments made by members at the NATO summit last month will bring this funding to 5 % of GDP by 2035.

Oxford Economics assumes that the acceleration canada’s military spending will stimulate of defense expenses will be funded by a larger federal deficit. Meanwhile, The latest forecasts were prepared before Ottawa announced a plan last week to reduce operational spending by 15 %. over the next three years.

The federal government plans to publish its 2025 budget in the fall, renouncing the traditional budgetary update of spring.

Without the associated savings. the increase in defense expenses would result in a permanent increase in the debt/GDP ratio for the federal government, according to the report.

The rise in real GDP linked to defense will not be enough to get Canada out of the “recession induced by the trade war” already underway. says Oxford Economics in his report.

The organization provides that the economy has folded in the last quarter. that the current recession will continue until the end of the year, with a total drop of 0.8 % of the real GDP before the end of the canada’s military spending will stimulate contraction.

140. 000 job losses – Canada's military spending will stimulate

If the job market has relatively well resisted the price conflict between Canada and the United States-the economy has created around 83,000 jobs last month, the surprise of most economists-Oxford Economics estimates that this resilience will be short-lived.

“Uncertainty surrounding American trade policy. new customs duties will continue to encourage companies to postpone or cancel their investment projects, reduce their production, slow hires and fire more and more workers,” read the report.

The firm provides 140,000 job losses during the recession, the impacts extending to the sectors previously affected by customs duties. This would increase unemployment to 7.6 % later this year, compared to 6.9 % in June.

Oxford Economics anticipates that the Banque du Canada will maintain its key rate at 2.75 % during this period of turbulence. although the cabinet has declared that they cannot exclude one or two additional rate drops by then.

The report also canada’s military spending will stimulate provides an increase in inflation at 3 % by mid-2010. which would prevent the Central Bank from implementing significant recovery measures in the form of drop in loan costs.

“The recession. the increase in inflation will lead to an increase in payment defects in the private sector and sales of housing in difficulty, increasing the risk of a deeper recession, a strong correction of real estate prices or an improbable financial crisis,” said the report.

Oxford Economics’ analysis is largely based on the persistence of current customs duties between Canada. the United States for the rest of the year.

The recession could worsen if the American president Donald Trump carried out his threat of imposing customs duties of 35 % on Canadian products from 1^is August. says the report, while a new economic and security agreement concluded by this date could offer significant relief.

Despite these impacts, Oxford Economics believes that Canada is in canada’s military spending will stimulate a relatively favorable position in economic risk.

The company assesses the degree of risk of the prospects of the main advanced economies according to various factors. including exchange rates, credit ratings and other domestic internal market.

With a risk score of 3.3 out of 10, Canada ranks 27^e Rank on 164 countries evaluated by Oxford Economics. This places the country behind the United States, Australia, France and Germany, but before Mexico, Japan and China.

Canada's military spending will stimulate

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