'We're not in a recession,' Finance Minister Joe Oliver says
Published Friday, July 3, 2015 10:36AM EDT
Last Updated Friday, July 3, 2015 5:41PM EDT
Finance Minister Joe Oliver does not believe that Canada is in the midst of a recession, saying he's still confident the economy will grow this year.
Economists with Bank of America Merrill Lynch predicted Thursday that Canada’s economy would shrink by 0.6 per cent in the second quarter, and that the Bank of Canada would be forced to make another interest rate cut. As well, they forecast that a downturn will push the Canadian dollar to under 77 cents US by early 2016.
But Oliver says, despite the economy contracting 0.6 per cent in the first quarter, he's convinced there will be a turnaround in the second.
"First off, we're not in a recession. We don't believe we will be in a recession," he told reporters in Toronto, where he was making an arts and culture funding announcement on Friday.
"A recession, technically, as you know, is two quarters (of negative economic growth), and we don't have results from the second quarter."
Oliver said the Department of Finance relies on 15 private-sector economists who have forecast two per cent growth for 2015. He noted that the IMF and the OECD are also forecasting growth, and that the Bank of Canada has most recently forecast 1.8 per cent growth.
"We expect solid growth for the year, following a weak first quarter," he said.
Concerns about a possible recession have been growing, fuelled most recently by last week's Statistics Canada GDP report that showed the economy had contracted for the fourth consecutive month. According to the report, the economy has been hurt by weakness in both the energy and mining sectors.
CIBC senior economist Andrew Grantham was among those saying the data showed the economy was on a downturn, writing that the "surprise contraction in April GDP leaves open the probability that the second quarter as a whole could be negative, which would technically put the economy in recession."
But a report from Scotiabank predicts that the effects of the drop in oil prices will likely be “short-lived,” because other provinces that benefit from low oil prices will pick up the slack.
“As Governor Poloz notes, the benefits of lower oil prices and an improving global economy eventually take over," the report says. "Patience is required.”
Scotiabank economist Derek Holt also says he doesn't expect the Bank of Canada will cut its overnight rate -- either this year or next.
BNN's Paul Bagnell notes, while Oliver mentioned that economists have not yet revised their predictions for growth this year, they still may.
"I've spoken to a couple of Bay Street economists since yesterday and they are revising their math on the Canadian economy. While they may not be calling for a recession coming to Canada, it is very likely we will see reduced forecasts from them," he told CTV News Channel.
The Bank of Canada next is scheduled to make its next rate announcement on July 15. Some economists now predict they will make a 0.25 per cent overnight rate cut either then or at the next scheduled meeting.