Canada's resource-based economy will reel from the sting of a slump in oil prices until mid-2015 at least, when exporters may start to benefit from stronger U.S. growth and a weaker Canadian dollar, according to the top forecaster for the Canadian economy in Reuters polls in 2014.
Brent crude prices halved between June 2014 and mid-January amid a global supply glut and weak demand. That has already started to hurt Alberta, the main oil producing province, with job losses, falling home sales and business investment.
Although oil prices have begun to rebound, there is still more damage in store, according to JPMorgan's Canada economist Silvana Dimino, who topped the Reuters economic poll accuracy league for 2014, compiled by StarMine.
She expects economic growth to average 2.1% this year on an annualized basis, scaled down from the 2.4% she had forecast in a poll last month.
A sharper slowdown in growth could prompt the Bank of Canada to cut rates by another 25 basis points in March, Dimino said, after the central bank trumped all economists' predictions with a surprise rate cut at the January meeting.
Governor Stephen Poloz said on Wednesday the bank had taken the right amount of insurance with its January rate cut, a remark that prompted several economists to ditch predictions for another rate cut in March.
Before that move, the Bank of Canada, U.S. Federal Reserve and the Bank of England were the only major central banks expected to raise rates any time soon.
Still, Canada's economy is expected to improve toward the end of the year as exports start to pick up, Dimino said.
