TORONTO - Canada's economy is expected to outperform its US counterpart, says the RBC Financial Group. The bank has forecasted Canada's Gross Domestic Product (GDP) will reach 3.4 per cent this year and 3.5 per cent in 2004.

RBC also predicts that the strong economy will lead the Bank of Canada to keep raising interest rates throughout the year to 4.5 per cent before 2004. In contrast the U.S. rates are expected to hold at 1.25 per cent.

"From the end of 2002 to mid-March, the Canadian dollar appreciated just over six per cent against the U.S. dollar and it looks like this appreciation will continue in the medium-term," said Craig Wright, vice-president and chief economist of RBC Financial Group. "We expect the Canadian dollar to reach 68.5 U.S. cents by the end of the year and reach the 70 U.S. cent mark by the end of 2004."

Healthy consumer spending, and employment growth were listed among the reasons for the Canadian boom. The report also pointed out that SARS and the war in Iraq could pose risks in the coming months.

The forecast is available at www.rbc.com/economics/market/pdf/fcst.pdf.

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