TD boosts 2010 forecast to 3.8% growth

TD Bank Financial Group has increased its forecast for how much the global economy will grow in 2010 by a full percentage point, to 3.8 per cent.

"The global economic recovery is underway, and worries about a double-dip recession will likely prove unfounded," TD chief economist Don Drummond wrote in the bank's quarterly economic report on Wednesday.

The bank was previously calling for 2.7 per cent growth in 2010. In addition, the bank expects the global economy to contract by 1.1 per cent in 2009. That's less than the 1.9 per cent contraction forecast earlier.

In 2011, the bank is expectingfourper cent growth.

Real estate markets that were the epicentre of the financial crisis have stabilized, the report noted. After hitting historic lows earlier in the year, global inventories and consumer spending seem to have rebounded as well.

"Improved consumer and business confidence should also be reflected in a greater willingness to spend and invest," Drummond said. "This is how economies have climbed out of recessions before, and it will play out again."

Canadian forecast increased

Despite a 3.4 per cent annualized contraction of Canada's gross domestic product in the second quarter of 2009, the Canadian economy, too, appears to have turned the corner, the bank said.

Thoughit remains concerned about what a rising loonie might do to the recovery, the bank now expects Canada's economy to expand by 2.5 per cent in 2010, an increase over previous estimates. That should be followed by a 3.1 per cent growth rate in 2011, the bank says.

The global trade rebound has positive connotations for Canada. The bank expects Canadian exports to be up by 25 per cent in the July to September quarter of 2009, which would mark the first time in two years that exports contributed to Canada's economic growth.

The bank's 2.5 per cent projection for Canada is also slightly ahead of the 2.4 per cent increase it expects for the American economy. For 2011, the bank is predicting 3.3 per cent growth for the U.S. economy.

Positive job growth and improvement in the housing market are not expected until 2010 at the earliest.

In Europe, the bank is predicting growth in the 2.2 per cent to 2.5 per cent range for 2010 and 2011.