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S&P forecasts below-potential GDP growth for Canada in 2020

S&P Global Ratings raised Canada's real GDP growth forecast for 2019 to 1.5% from 1.2% previously but said the expansion could ease in 2020 to a rate that is below potential.

The rating agency said it expects Canada's economy to grow at 1.4% in 2020, before improving to about 1.9% in 2021.

The 3.7% annualized GDP expansion in the second quarter of 2019 was above expectations, S&P Global Ratings said, but the spike was likely temporary and growth has started to slow down in the second half, as highlighted by a weaker goods sector.

"While the second quarter showed surprising strength, an unsustainable surge in net exports masked underlying weakness in domestic demand," said Satyam Panday, senior economist for the U.S. and Canada at S&P Global Ratings.

The Bank of Canada is expected to maintain its policy rate at the current level of 1.75% through 2020, although it may join other major central banks that are lowering rates if the global economy further deteriorates, the rating agency said.