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.
Underscoring Goldman Sachs forecast last week of oil prices at or below $50 per bbl until at least 2020, Bloomberg News is today reporting that Iraq is preparing to unleash a flood of new oil within the next few months. This is very bad news for the price of Western Canadian Select bitumen, and Alberta oil sands producers. Saudi Arabia’s strategy, together with OPEC, to squeeze high-cost oil producers of oil sands and shale seems to be working. More pessimistic forecasts of WCS at $25 for an extended period now appear more plausible.
The evidence of a Canadian economic train wreck just keep rolling in. This report from CNN Money mentions last week’s Bank of Canada dismal report on the Canadian economy, and goes on to add additional economic data and comment from respected investment banks around the World. The one glaring omission is any political discussion of how Canada got into this mess, and who is responsible for it.
The Bank of Canada’s Spring 2015 Business Outlook Survey (link to complete report below) released this week, gives more reason for serious concern regarding the economic prospects for all Canada, and the widening impact of Canada’s “natural resource curse”: it’s fossil fuel based economy. The report points to a significant increase in business pessimism about the economy as a whole, well beyond the oil economy, which is causing business to significantly reduce plans for capital spending and hiring. As I pointed out previously, the impact of the oil economy collapse is likely to reverberate throughout the Okanagan. The BofC report suggests that the impacts will be even deeper and more diverse.