Rocky year ahead

Chief econ­o­mists cite con­tin­ued low oil prices

The Guardian (Charlottetown) - - BUSINESS - THE CANA­DIAN PRESS AU­TOS

Canada is headed for a rocky year as low oil prices con­tinue to drag on eco­nomic per­for­mance, the chief econ­o­mists of some of Canada’s big­gest banks said Tues­day.

Bank of Mon­treal chief econ­o­mist Dou­glas Porter told a morn­ing gath­er­ing of lead­ing econ­o­mists that it’s go­ing to be a “very close call” whether the fourth quar­ter of 2015 saw any eco­nomic growth.

Canada’s re­source sec­tor has been slammed as the price of crude has fallen from a high above US$105 in June 2014 to be­low US$40 over the past few months, just as other com­modi­ties are at or near multi-year lows.

Speak­ing at an event hosted by the Eco­nomic Club of Canada, Porter said it looks like last year was one of the worst years for eco­nomic growth in decades out­side of a full-on re­ces­sion, and Canada is look­ing at a 2016 growth rate not much higher than last 2015.

The loonie, which has plunged as the price of oil has de­clined, also has fur­ther to fall, he said.

The neg­a­tive out­look for oil, the dif­fer­ing pol­icy di­rec­tions be­tween the Cana­dian and Amer­i­can cen­tral banks, and the strength­en­ing Amer­i­can econ­omy mean the loonie will fall be­low 70 cents US be­fore it be­gins to re­cover, Porter said.

“The last line of de­fence for the Cana­dian dol­lar would be some sta­bil­ity in oil prices and re­source prices, and we just don’t see that sta­bil­ity over the next few months.”

Canada’s dol­lar has been trad­ing near 11-year lows for weeks but has re­mained above 71 cents U.S. since 2003.

Craig Wright, Royal Bank of Canada’s chief econ­o­mist, said the cheap loonie and the Amer­i­can eco­nomic re­cov­ery should pro­vide a boost to Cana­dian ex­ports in the near fu­ture, al­though such a re­bound hasn’t ma­te­ri­al­ized so far.

Wright said Canada will de­pend more than ever on its largest trad­ing part­ner for ex­port growth, be­cause of the fal­ter­ing per­for­mance of the rest of the world in­clud­ing the Euro­pean Union and China.

“The U.S is the bright shin­ing star,” he said. “But it’s not a very bright sky.”

CIBC chief econ­o­mist Avery Shen­feld said 2016 will be a dis­ap­point­ing year for the global econ­omy at large, and Canada won’t be spared.

Yet by the end of the year, he said, in­vestors may see bet­ter re­turns as the world looks ahead to a brighter 2017.


An oil worker holds raw oil­sands near Fort McMur­ray, Alta., on July 9, 2008. The chief econ­o­mists of some of Canada’s big­gest banks say the coun­try is headed for a rocky year as low oil prices con­tinue to drag on eco­nomic per­for­mance.

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