Alberta wildfires put economy in reverse

OTTAWA — The Bank of Canada is cutting its outlook for the year, saying the extensive damage from the Alberta wildfires helped fuel an economic contraction in the second quarter.

The effects of the disaster, which temporarily shuttered key oilsands facilities, took hold as the national economy struggled with disappointing exports numbers, feeble business investment and uncertainty around Britain’s vote to leave the European Union.

The central bank’s forecast was released Wednesday along with its scheduled announcement on its benchmark interest rate, which it left at the rock-bottom level of 0.5 per cent, as expected.

“Essentially, the underlying forces that support a strengthening of growth in Canada remain the same, and the adjustment process of the economy to the lower oil prices is well underway,” Carolyn Wilkins, Bank of Canada senior deputy governor, said in French after the announcement.

“That said, international and national factors have led us to lower our projections for growth in the (gross domestic product).”

The report also provided a more-detailed assessment of the effects of the huge Alberta wildfires that erupted in May, which cut oil production.

The central bank estimated the fires shaved 1.1 percentage points from second-quarter growth — as measured by real GDP — and forced the economy to contract in that period by one per cent. In April, before the wildfires, the bank had forecast the economy would grow by one per cent.