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By Susan Merivirta, Chief Financial OfficerCorporate News

The following are some excerpts from an article I was just reading entitled “Scotiabank’s Chief Economist’s economic outlook for 2009”. Warren Jestin is the Senior Vice President & Chief Economist for Scotiabank.

How has the deterioration in global economic activity impacted Canada?

The Canadian economy has lost considerable momentum since the summer, as the combination of rapidly weakening U.S. economic activity and the sharp drop in commodity markets hit export sales, earnings and employment. While Canadian Households are in better financial shape than their U.S. counterparts, growing concern about the economic outlook is cutting into big-ticket purchases. The Canadian housing market has softened in many areas across the country, with prices posting year-over-year declines for the first time since 1998. With global growth poised to weaken further during the first half of 2009 in both developed and emerging nations, economic conditions in Canada will remain challenging in the months ahead.

That said, our economy will continue to perform better than the U.S. because our financial and fiscal fundamentals are much stronger. Canadian financial institutions are among the strongest in the world, and our households have less debt leverage and more equity in their homes. The longer-term broad-based commitment of Canadian governments to balanced budgets is also an important strategic advantage, which allows policymakers on this side of the border much greater leeway for providing economic stimulus without jeopardizing their longer-term fiscal health.

What parts of the Canadian economy will be hardest hit in 2009?

Even with the recent swoon in the Loonie, exporters will face very challenging times in the first half of 2009. Tourism and service industries plugged into global business networks also will experience weakening markets and bottom-line pressures. Rising unemployment will inevitably dampen household purchases of postponable, big-ticket items, particularly autos. Residential construction and sales activity is already softening, although renovation activity should have greater resilience.

Weaker demand will reduce sticker prices and improve bargaining power for consumers who opt to keep shopping. Similarly, investors with a longer-term view and greater risk tolerance also will find very attractive valuations. Interest rates also are likely to come down further in the months ahead – good news for borrowers, but not for investors looking for fixed income.

How would you sum up Canada’s overall position in the global economy?

On a relative basis, our economic circumstance compare very favourably with most other nations. A year from now, hopefully the Canadian and global economies will be into a recovery mode. It may not be as fast as we’d like because the U.S. will still have problems and global financial markets will be prone to volatility. However, for the average person on the street and for investors, the move back into economic recuperation and expansion will be very welcome news.

It is common sense that businesses and consumers should be cautious in the months ahead, but the extreme skepticism that has led to dire predictions about our economy and financial market is unfounded. The important thing is to be cautious about your finances and prudent in your economic management because that’s the best way to weather this particular storm.

This is one man’s opinion, but it is a balance to many others who are very pessimistic. I believe that the last sentence is very good advice.