The outlook for the Canadian economy has "weakened significantly" for the remainder of 2011 and into next year, says the Organization for Economic Co-operation and Development.
In a report released Monday, the OECD says the high Canadian dollar will continue to depress exports, "tempering the speed of economic growth."
The dollar is one factor that could keep exports below the 2007 peak cited in the group's latest Economic Outlook. The other is global uncertainty.
Government cutbacks and a softening job market will likely affect household spending, the report says, as debt levels remain high -- about 150% of disposable income -- and consumer confidence remains frail.
"Persistence or worsening of global growth prospects and financial-market turbulence may lead to a sharper slowdown in exports, while damaging business confidence and investment. A sharp correction in house prices could further (dampen) consumption," the report says.
The Canadian economy will remain subject to the effects of weakening conditions in Europe and the United States, the report says.
If the sovereign-debt crisis in the euro-zone remains unaddressed, the economic fallout will worsen and could create a credit crunch, the organization warns.
Inaction, the OECD says, could plunge Europe into a deep recession, which would create negative ripples for the global economy. Likewise, inaction in the United States could also plunge that country into a recession, the report says.
As for recommended action in Canada, the report urges the federal government to consider delaying the tightening of spending if economic conditions worsen.
Provincial governments, the report says, should follow the federal example and have an independent group of economic advisers review government budgets and recommend future steps.
And as for the Bank of Canada, the recommendation was simple: Keep interest rates low until at least 2013.
Gross domestic product across OECD countries will decline from 1.9% this year to 1.6% in 2012, before recovering to 2.3% in 2013, according to the report.
Unemployment in the OECD area is also projected to remain high, with the jobless rate staying at around eight per cent through the next two years.
The OECD is comprised of 34-member nations, with a mandate it describes as helping governments tackle economic, social and governance challenges.
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