Cana­dian growth ex­pected to fal­ter

Pre­dicted growth re­ceives big­gest down­grade in IMF world eco­nomic out­look up­date

Cape Breton Post - - BUSINESS EXTRA - ECON­OMY OT­TAWA

The In­ter­na­tional Mon­e­tary Fund has slashed its out­look for Cana­dian eco­nomic growth this year while also re­duc­ing ex­pec­ta­tions for the global econ­omy.

The fund is call­ing for growth in Canada of 1.5 per cent this year, down from an April growth forecast of 2.2 per cent, the big­gest down­grade in its world eco­nomic out­look up­date is­sued Thurs­day.

But growth in Canada in 2016 now is ex­pected to clock in at 2.1 per cent, up from an ear­lier forecast of 2.0 per cent.

The re­duc­tion for Canada came as the IMF cut its out­look for growth in the global econ­omy in 2015 to 3.3 per cent from the 3.5 per cent it pre­dicted in April, cit­ing weak­ness in the U.S.

“The short­fall re­flected to an im­por­tant ex­tent an un­ex­pected out­put con­trac­tion in the United States, with at­ten­dant spillovers to Canada and Mexico,’’ the IMF said in its re­port.

“One-off fac­tors, no­tably harsh win­ter weather and port clo­sures, as well as a strong down­siz­ing of cap­i­tal ex­pen­di­ture in the oil sec­tor con­trib­uted to weak­en­ing U.S. ac­tiv­ity.’’

The cut by the IMF fol­lows sug­ges­tions by sev­eral econ­o­mists that Canada may have slipped into a re­ces­sion in the first half of the year and spec­u­la­tion that the Bank of Canada may cut in­ter­est rates.

The Cana­dian econ­omy con­tracted in each of the first four months of the year as low oil prices and weak U.S. eco­nomic growth took their toll.

The cen­tral bank is widely ex­pected to trim its out­look for the econ­omy when it re­leases its mon­e­tary pol­icy re­port next week, but what it will do with in­ter­est rates is less clear.

In its April re­port, the cen­tral bank pre­dicted growth of 1.9 per cent for this year and 2.5 per cent in 2016.

TD Bank sug­gested ear­lier this week that it was likely that the Cana­dian econ­omy slipped into re­ces­sion in the sec­ond quar­ter and pre­dicted the Bank of Canada would cut its key rate next week.

On Thurs­day, TD Bank also cut its ex­pec­ta­tions for in­di­vid­ual prov­inces, but noted sharp re­gional dif­fer­ences.

“Both the re­cent chal­lenges in the global oil mar­ket and the early year woes of the U.S. econ­omy have con­spired against pro­vin­cial economies so far this year,’’ TD said in its re­port.

“For­tu­nately for a num­ber of oil con­sum­ing re­gions, such as On­tario and Bri­tish Columbia, rel­a­tively solid do­mes­tic mo­men­tum has helped to mit­i­gate the neg­a­tive im­pact from dif­fi­cult ex­ter­nal con­di­tions.’’

TD ex­pects the Al­berta econ­omy to con­tract by 0.9 per cent this year, while New­found­land and Labrador is pre­dicted to drop 0.9 per cent. Saskatchewan should eke out a gain of 0.2 per cent, it said.

Bri­tish Columbia is ex­pected lead growth this year with a gain of 2.2 per cent, fol­lowed by On­tario at 2.1 per cent.

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