Capital Economics predictions are notably more dismal than those of other observers’.
“With business investment expected to fall more sharply this year than last, we expect the economy to struggle badly in 2016, buffered by only a moderate improvement in non-energy exports,” the group’s Canada economist David Madani wrote in his latest report, as quoted by The Globe and Mail
“We aren’t bears, but we do have bearish views on Canada because of the slump in oil prices and the growing imbalances in the housing sector over the past few years,” Madani said, alluding to the disproportionate contribution of Toronto and Vancouver to the overall health of the country’s real estate markets.
The report added that even a recovery in commodity prices would not be enough to revive the flagging economy, especially since investment in the energy sector is expected to decline further and crude oil benchmark prices are projected to stand at just $60 next year.
“Indeed, new oil sands projects require prices between US$60 and US$80 per barrel to break even, and closer to US$80 to be profitable,” Madani stated.
However, the report still anticipated further cuts on the Bank of Canada’s baseline interest rates, down from 0.5 per cent to 0.25 per cent through 2017. The loonie is also expected to “prove fairly resilient” by ending up at 75 cents this year, and 77 cents next year.
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Despite the Canadian real estate sector’s steady growth over the past few years, a recent report by Capital Economics is not optimistic of the country’s prospects for the next two years, pegging economic growth at just 0.7 per cent in 2016 and 1.2 per cent in 2017.