The Organization for Economic Co-operation and Development has sharply cut its growth forecasts for Canada for this year and next, a continuing reminder of how sinking oil prices are pulling down the country’s economy.
The downgraded projections from the Paris-based OECD come amid mounting job losses in Canada’s oilpatch. Talisman Energy, Nexen Energy and ConocoPhillips Canada have all separately announced plans to eliminate hundreds of workers in the coming weeks.
The OECD now estimates the Canadian economy will expand by 2.2% in 2015. That’s 0.4 of a percentage point lower than previously thought.
The group also trimmed its forecast for 2016 to growth of 2.1%, down 0.3 of a percentage point since its November forecast.
It left its projections for the U.S. unchanged and raised expectations for much of Europe, Japan and India, noting lower oil prices and lower interest rates are boosting economic activity in many countries.
The effects of lower prices, said one expert, will be "disproportionately felt by companies in the energy and oil sector. There’s a spillover effect on investment as profits get squeezed and investment gets delayed or taken off the table."
That leads to lower government revenues as well as reduced employment and household income.
While the ill effects of lower oil prices will be felt most deeply by the oil-producing provinces (Alberta, Saskatchewan, and Newfoundland and Labrador), the benefits — cheaper gasoline, lower interest rates and a cheaper Canadian dollar — will be enjoyed by manufacturers and exporters, as well as consumers.
