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RBC sees strengthening economic growth in Canada, but loonie falling further

The Royal Bank is predicting relatively strong economic growth for Canada this year and next, although it says the loonie is about to fall even further.

The big bank says in a new forecast that economic growth should hit 2.5 per cent this year, despite a stuttering start to 2014 caused by the winter deep freeze, with growth picking up to 2.7 per cent in 2015.

That’s slightly stronger than the Bank of Canada’s call for 2.5 per cent growth in both years and above many other private sector forecasts, which predict an even softer 2014.

As for the currency, RBC says the loonie hasn’t ended its descent and expects it will trade at about 87 cents US by the end of this year and dip to 85 cents by the end of 2015. The loonie closed down 0.68 of a cent at 89.79 cents US on Tuesday.

RBC chief economist Craig Wright says he believes Canadian exporters will begin benefiting from a stronger U.S. economy this year and get an added boost from the weaker loonie.

A weak currency makes Canadian exports less expensive in foreign markets and imports more costly to Canadians.