The bank expects the private sector to become the sole driver of domestic demand in Canada by 2011, making this year a "turning point" as monetary and fiscal stimulus, which kick-started the recovery, are withdrawn.

Finance Minister Jim Flaherty, already in Washington for the Group of 20 talks, said he was "relatively comfortable" with the Bank of Canada's projections, saying they show Canada is emerging from the recession stronger than any other G7 country.

The central bank said the housing sector, marked by fierce bidding wars in Toronto and Vancouver, had exceeded its expectations, but that activity in the sector should weaken later this year.