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RBC Cuts Canada Growth Forecast to 3.3% in 2010, 3.2% in 2011

Sept. 10 (Bloomberg) -- Royal Bank of Canada Chief Economist Craig Wright cut his forecast for Canadian growth this year and next, citing concerns over the U.S. and global economic outlooks.

The Canadian economy will expand 3.3 percent in 2010, less than Royal Bank’s previous forecast of 3.6 percent, and 3.2 percent in 2011, down from 3.5 percent, according to a quarterly projection e-mailed by the bank.

The Bank of Canada this week, in a statement after it raised its benchmark lending rate to 1 percent, said it expects a more gradual recovery than it did in July because of slower U.S. growth.

Wright also said the output gap -- the difference between what the economy produces and its potential output -- will be eliminated by mid-2012. The unemployment rate will drop to 7.3 percent by the end of 2011 from July’s 8 percent figure, he forecast.

Royal Bank, which is Canada’s biggest lender, also said it now expects Saskatchewan’s economy to grow 6.3 percent this year, up from a 3.8 percent projection last quarter, and Alberta to expand 3.5 percent, from a previous forecast of 3.1 percent.

Ontario’s growth forecast was cut to 3.5 percent from 3.8 percent, while Quebec was lowered to 3 percent from 3.5 percent.

To contact the reporter on this story: Alexandre Deslongchamps in Ottawa at adeslongcham@bloomberg.net.

To contact the editor responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net; David Scanlan at dscanlan@bloomberg.net.

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