OECD Slashes Canadian Economic Forecast Yet Again


One day after federal Finance Minister Joe Oliver deflected concerns over Canada’s poor economic showing to start 2015, the OECD announced that it now projects Canadian growth this year at about 1.5 percent, down sharply from 2.2 percent during its previous temperature reading in March and a full percentage point below its forecast last November. Oliver on Tuesday told a Parliamentary Committee that he does not anticipate a recession.

Carolyn Hyde of Bloomberg News discusses the revised OECD global economic forecast, and further negative impacts to the Canadian and U.S. economies

Today, June 3rd, the Paris-based body has also adjusted its timetable for the start of monetary tightening by the Bank of Canada to early-2016 from mid-2015.

Commenting on the main risk to even its reduced Canadian forecast, the OECD cites “a disorderly housing-market correction, particularly given high household debt, which would depress private consumption and residential investment and could, in the extreme, threaten financial stability.”

Other potential negatives for the Canadian economy range from a further fall in oil prices and slower than expected growth in the United States, to a sudden Chinese slowdown, which could translate into “a greater and more protracted than expected deceleration in activity, including weaker investment, exports and private consumption.”

OECD

Potential Canadian pluses include a recovery in oil demand and prices and higher than anticipated growth in the United States and other important export markets.

Royal Bank of Canada is more upbeat in a forecast also released today. The bank predicts a much better second half for the Canadian economy, with growth reaching 1.8 percent this year and 2.6 percent in 2016.

RBC acknowledges that investment will be weak for the rest of the year, as energy companies slash capital spending by about 30 percent. But the bank expects other sectors to pick up part of the slack, thanks to low financing costs and stronger demand.

But the OECD worries that investment everywhere will remain below the level of previous recoveries, partly because of weak consumer demand, continuing uncertainty about fiscal policies and a lack of structural reforms in several key economies.

“Despite tailwinds and policy actions, real investment has been tepid and productivity growth disappointing,” the OECD report says.

“By and large, firms have been unwilling to spend on plant, equipment, technology and services as vigorously as they have done in previous cyclical recoveries.

“Moreover, many governments postponed infrastructure investments as part of a fiscal consolidation.”

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One Comment on “OECD Slashes Canadian Economic Forecast Yet Again”

  1. shaheen42 June 3, 2015 at 19:38 #

    Thanks David for updating about ground realities more explicitly on this important issue .

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