OTTAWA – The International Monetary Fund has cut its growth outlook for the Canadian economy…
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.
Regrettably, this week’s events in the oil market, provide further evidence of the dire consequences ahead for the Canadian oil economy. Oil industry bulls who have been betting on a quick rebound in oil prices are likely to get severely burned, and the prospects for the local tourism based economy are only worsening.
The growing downturn in the fossil fuels industry has extraordinary implications globally. While some are proposing theories that this downturn will be short-lived, there simply isn’t much evidence to support an optimistic forecast. Saudi Arabia is openly executing a long term strategy to squeeze “high cost oil producers,” using its unquestioned leverage and the lowest production costs in the World. Europe is facing potential deflation, and the current European recession is forcing the European Central Bank to begin “quantitative easing,” beginning this week, essentially printing money. The Russian economy is in shambles as the ruble weakens, something Putin did not plan on occurring. The Chinese economy has weakened sharply and will likely remain weak into the near foreseeable future. Meanwhile Canada is at the mercy of these global forces, with little in the way of economic reserves to defend its economy, having bet the entire Canadian economy on oil.