Canada's already lacklustre rate of economic growth is only going to slow further as the housing correction intensifies. Home sales are now falling sharply and it is only a matter of time before prices begin to decline. We still believe that house prices will eventually drop by as much as 25%. In addition, the further deterioration in the global economic outlook suggests that Canada's exporters will come under even greater pressure. Overall, we expect annual GDP growth to slow from an already modest 1.9% in 2012 to only 1.2% in 2013.
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