OECD lowers Canadian, global growth projections
Published Thursday, February 18, 2016 7:21AM EST
Last Updated Thursday, February 18, 2016 9:08PM EST
The Organisation for Economic Co-Operation and Development has lowered its growth projections for Canada, the United States and the overall global economy.
The OECD estimates that Canada's economy will grow by 1.4 per cent in 2016, less than its previous estimate of 2.0 per cent growth. That growth is expected to increase to 2.2 per cent in 2017 – slightly less than previously thought.
However, the OECD’s chief economist, Catherine Mann, told BNN that Canada is still on the right track when it comes to fiscal spending.
During the election campaign, Prime Minister Justin Trudeau promised an additional $60 billion over 10 years towards infrastructure projects in order to stimulate the economy. But he has faced criticism for planning to run three consecutive budget deficits as a result.
“Canada is doing, with regard to fiscal spending, what we are arguing should be done on a collective basis in the entire OECD,” Mann told BNN on Thursday.
Because many economies have the capacity to borrow at low or even negative interest rates, “fiscal spending on infrastructure, along with monetary ease and structural forms, are the recipe to bring global growth back,” she said.
Mann also said that, despite lower oil prices and a falling loonie, Canada is benefiting from its diversified exports base.
“Not all countries have been able to do that,” she said.
David Detomasi, a professor at Queen’s University Smith School of Business, said that Canada has been “riding the commodity boom” – which includes oil exports -- for the past 15 years, but demand has been slowing down in emerging markets, especially China.
In the meantime, our exports to the United States haven’t caught up to the point where they can “make up the difference,” Detomasi told CTV News Channel.
He said the downward trend is still not being felt in some industries, especially when it comes to home and auto sales, which are still strong.
OECD data shows that growth projections for Canada, U.S. and other G7 countries, including France, Germany and Japan, are dragging down the overall global outlook.
The OECD expects that U.S. economic growth over the next two years will be slower than the 2.4 per cent estimate for 2015. The organization has also lowered its outlook for global economic growth to 3 per cent in 2016 and 3.3 per cent in 2017.
“Right now, we are looking at a flat line of global growth. No change in global growth between 2015 and 2016 and only a very modest uptick for 2017,” Mann said.
“At these rates of growth, politicians cannot make good on the promises they’ve made to their citizens,” such as jobs for young people and pensions for seniors, she added.
The revised outlook for the Canadian economy by the OECD brings it in line with the latest forecast by the Bank of Canada, which is predicting growth of 1.4 per cent this year. The BoC is predicting growth of 2.4 per cent in 2017, 0.2 per cent higher than the OECD’s projection.
With files from The Canadian Press