Cheap oil, soft U.S. demand to drag on Canadian economic growth: Reuters Poll

Thu Jul 21, 2016 11:45am EDT
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By Anu Bararia

(Reuters) - Canadian economic growth will pick up a bit next year, helped by federal fiscal stimulus, but subdued U.S. demand and weak oil prices are expected to limit gains, a Reuters poll found.

Canada is running a budget deficit of C$29.4 billion ($22.53 billion) this fiscal year to help fund increased infrastructure and social welfare spending, making it one of few major economies using fiscal policy to try to spur growth.

Still, the survey of nearly 40 analysts forecast the economy will expand just 2.1 percent next year, in line with the International Monetary Fund's estimate but lower than the Bank of Canada's 2.2 percent projection.

That pace of growth is relatively modest, matched at several points over the past few years, and is expected to keep the central bank on the sidelines until at least the end of the next year. [CA/POLL]

"Fiscal policy stimulus has been announced but has not yet begun to affect the economy. The challenge is for the government to implement the infrastructure plan on schedule," David Watt, chief Canada economist at HSBC Bank Canada, wrote in a note.

"The economy is not in recession, it does remain on a slow growth trajectory, and there is little room for delay."

The economy will expand 1.3 percent in 2016, the poll forecast, similar to the central bank's estimate, but lower than the 1.7 percent median consensus in a poll three months ago.

Canada, a major oil exporter, is still grappling with the impact of battered crude prices and recent wildfires in northern Alberta that forced production shutdowns and likely caused the economy to shrink in the second quarter.   Continued...

A worker pours concrete at a construction site in Ottawa, Canada, April 8, 2016. REUTERS/Chris Wattie