OTTAWA (Reuters) - Canadian economists who provide the growth forecasts that will be used by the federal government in its April 21 budget see the economy expanding by 2 percent this year as the price of oil stabilizes, according to a Reuters survey.
The Canadian government has used the average of private sector growth projections as a basis for fiscal planning since 1994, with the forecast potentially making the difference between a deficit or surplus.
The 2 percent growth rate seen for 2015 is the median forecast of nine economists who responded to the Reuters survey out of 15 included in a government private sector poll in its fiscal update last November.
Growth is seen picking up slightly in 2016 to 2.2 percent.
Finance Minister Joe Oliver, who is meeting with economists in Ottawa on Thursday, has vowed the ruling Conservatives will balance the books in the 2015-2016 fiscal year.
The Conservatives have run seven years of deficits in the fallout from the global credit crisis, and the upcoming budget could set the tone for the party’s bid to win re-election later this year.
Oliver announced legislation on Wednesday that would commit the government to a balanced budget, unless there is a recession or extraordinary circumstance.
The forecast for 2015 in the Reuters survey is not far from the 2.1 percent growth rate the Bank of Canada projected in January when it cut interest rates to 0.75 percent.
The price of West Texas Intermediate crude oil is seen trading at $53 a barrel this year, slightly stronger than Wednesday’s settlement price of $50.42, according to the survey. Crude is seen improving to $65 a barrel next year.
The price of oil, a major export for Canada, has more than halved since its peak last June, and the sharp drop prompted Oliver to delay releasing the budget until later this month. It is normally unveiled in February or March before the start of the new fiscal year.
A stronger economy out of the United States - Canada’s biggest trading partner - should help offset some of the dampening effect of cheaper oil. Economists expect to see just over 3 percent growth south of the border this year and 2.9 percent growth in 2016.
Editing by Jeffrey Hodgson and Ted Botha