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Brian Porter, chief executive officer of Bank of Nova Scotia, offered an optimistic view of the economy, arguing in a speech there is a “fundamental disconnect” between turbulent financial markets and the actual performance of the economy.
“This disconnect is unsettling, and threatens business and consumer confidence,” Mr. Porter said in prepared remarks delivered to the Canadian Club of Toronto on Friday.
His comments follow an unusual period of stock market volatility. The benchmark Canadian stock index has fallen more than 20 per cent from its recent high, putting it into what market observers call a bear market.
At the same time, oil prices have fallen to 12-year lows, the Canadian dollar has plummeted to a decade-low of about 72 cents against the U.S. dollar, and low bond yields are reflecting deep concern about economic activity.
Mr. Porter agreed that low oil prices, driven by geopolitical factors, are creating widespread market disruption, which is driving a flight to the safety of government bonds.
“Business leaders and consumers see all of this, which is then amplified through the media, with dire warnings and premature talk of recession,” he said. “This only fuels a negative cycle.”
He pointed out, though, that the economy continues to expand, if only modestly. He said that in meetings with the bank’s commercial customers, which have operations around the world, they tell him that their businesses are performing well.
“They’re investing in their businesses and in new technology. They’re hiring new employees,” Mr. Porter said. “And on average, they’re feeling optimistic about the future.”
He also believes that Canada’s economy is adjusting to the lower dollar and depressed commodity prices and is becoming more diversified.
However, he argued that more can be done to accelerate this transition.
“I believe industry and governments can help to accelerate Canada’s economic transition by investing in innovation, spending smartly and boosting competitiveness,” Mr. Porter said.
“It’s important that we look beyond today’s uncertainty and take action to position our businesses and our country for future success.”
He also said that Canada will benefit from joining the Trans-Pacific Partnership but only if it also makes investments in infrastructure as well – particularly projects that can move people, ideas and resources.
“Projects that will create jobs and serve Canadian families and communities for years to come,” he said.
“One such project is the Energy East pipeline: an entirely Canadian project that is good for all Canadians.”