After a slight pick-up in the second quarter, we expect GDP growth to drop back below 2% annualised in the second half of this year, as the strength in housing investment fades and consumption slows. While growth in business investment continues at a fairly moderate pace, the sharp drop back in commodity prices may jeopardise specific mining projects. Canada's exports could also be hampered by the apparent slowdown in the US and China and the renewed recession in Europe. Overall, we expect annual GDP growth to average only 2.0% in 2012 and an even lower 1.5% in 2013, though the risks to this forecast are skewed to the downside. The biggest danger is that a disorderly breakup of the euro could trigger another global financial crisis.
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