Canada's lagging growth pressures policymakers to add stimulus

Mon Sep 26, 2016 5:58pm EDT
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By Fergal Smith

TORONTO, Sept 26 (Reuters) - Canadian policymakers are facing increased pressure to support the country's lackluster economy as infrastructure spending takes time to kick in and record high debt loads dampen the impact of stimulus cheques.

Weak oil prices, disappointing growth in non-energy exports and a wildfire in Alberta that cut oil production have all weighed on Canada's economy this year, offsetting fiscal stimulus measures to support the economy.

"The Canadian economy needs more stimulus ... fiscal, monetary, structural," said David Watt, chief economist at HSBC Bank Canada.

Canadian growth this year is less robust than the government initially expected, Finance Minister Bill Morneau said on Monday, adding that the government will look at what more it might do. The government typically provides a fiscal update in November or December.

The fall update would be a reasonable time to bring forward fiscal spending if good projects have been identified, said Doug Porter, chief economist at BMO Capital Markets.

But he added that is a big "if."

The government projected in March a C$29.4 billion ($22.2 billion) deficit, including payments to some parents with young children and a plan to increase infrastructure investment to C$120 billion over 10 years.

"It seems to be getting delayed in terms of that (infrastructure) expenditure occurring," said Paul Ferley, assistant chief economist at Royal Bank of Canada.   Continued...