One of this country’s leading economists says that Canada will avoid a major recession despite what analysts are predicting as a fallout from a faltering U.S. economy.

Dr. Warren Jestin told the audience at the 2008 Futures Symposium hosted Thursday by Muskoka Futures that a majority of economists expect the U.S. to be in a recession in the first half of the year, but added that his colleagues are more optimistic.

“The reality is that the U.S. economy has slowed down significantly and probably over the next 10 years, the next 15 years, it will be growing slower than it did in the 1990s. The U.S. will be going down to rates synonymous with growth rates we used to see in Germany, Italy, France and Japan.

“The big issue, of course, is how it knocks on Canada. I think that we are in better shape financially. If the U.S. actually does go into an economic recession — which technically is declining activity for a couple of quarters — it would take a further substantial deterioration in consumer confidence than where they are right now. Then we would probably get growth in this country at one or one-and-a-half per cent,” he said.

A longtime cottager to the region, Jestin is Scotiabank’s chief economist and has been with the bank since 1979. Before joining Scotiabank, he worked in the Bank of Canada’s research department and taught economics at several Canadian universities. He is on the board of the University of Guelph Heritage Fund and is chair of that university’s college of management and economics advisory committee.

Jestin is also on the board of advisers of the Sobey School of Business at Saint Mary’s University in Halifax. He earned an MA in economics at the University of Guelph in 1971 and was awarded a doctorate from the University of Toronto in 1977.

Jestin is a member of the C.D. Howe Institute’s Monetary Policy Council and has been involved with economic policy committees of the Canadian and Ontario Chambers of Commerce and the Toronto Board of Trade.

Jestin has been the keynote speaker for all of the symposiums and predicted at the 2007 conference the emergence of the loonie and a drop in cross-border tourism. He said at this year’s conference he believes there will be little or no growth in the American economy in the first half of 2008.

“However, I think there is enough momentum in the economy to avoid one of the sharp types of recessions that we used to see. The service sector is a lot more stable and their export environment is still reasonably good. But there is absolutely no doubt that in the household sector and in the housing sector it is going to be a very rough ride.”

The United States has been in the grips of an economic crisis due to the impact of the subprime mortgage financial crisis of 2007, which was a sharp rise in American home foreclosures during the fall of 2006 and turned into a global financial crisis within a year.

The crisis began with the bursting of the housing bubble in the U.S. and high default rates on subprime adjustable rate, and other mortgage loans made to higher-risk borrowers with lower income or lesser credit history than prime borrowers.

As of Dec. 22, 2007, a leading business periodical estimated subprime defaults would reach a level between US$200-300 billion globally.

Jestin said he is confident Canada can weather the economic storm.

“Alberta is booming, B.C. is booming and we have buoyant conditions in many other parts of the country, so we are not going there (recession). When you get down to two per cent growth, things do get a lot tougher. Part of it is tourism. It is a slow-growing environment and it is very challenging getting people to travel. You will see the economic constraints, but I don’t think we are on the verge of a major economic setback.”

Alan Kydd, an investment adviser with CIBC Wood Gundy, said he concurs with Jestin’s assertion. He said a strong commodity base in Western Canada is one of the keys to avoid an entrapment into a recession.

“The rest of the world requires everything that region can produce and there is long-term capital that has gone into the western economy that has been committed for the next five to seven years. So it is not like that (economic impact) is running away anytime soon.”

Kydd also stated the lowering of interest rates by the Bank of Canada and the U.S. Federal Reserve will help alleviate some of the credit crunch issues across North America.

“That does take some time to work itself into the economy. To say that Canada could skirt a recession, well, we are probably already in a slowdown more in Eastern Canada as opposed to the West.”