Economists at Bank of Nova Scotia have reduced their latest forecast for gross domestic product (GDP) growth for Canada, citing the impact of lower oil prices.
In a new report, Scotia indicates that it now expects GDP growth of 1.9% in 2015 and 2.0% in 2016. It says that the weaker outlook reflects “the continuing slump in crude oil prices and accelerated investment cutbacks in the energy sector.”
Non-energy exports should benefit from stronger U.S. demand and a weaker loonie, Scotia says. “However, sluggish employment and wage gains are expected to restrain consumer spending and housing activity, particularly in oil-producing regions,” it notes.
The firm has also lowered its GDP forecast for the U.S. to 3.1% this year, and 2.9% in 2016. “Industrial activity remains supported by solid domestic sales, but has lost some recent momentum alongside reduced energy-related investments, weak global growth and persistent U.S. dollar strength,” it notes.
Globally, the economy is “still having difficulty generating increased traction,” Scotia observes; adding, “The inability to generate sustained and stronger growth around the world attests to the persistent drag associated with chronic public and private sector debt burdens, the slow progress in implementing structural economic reforms in many countries, the increased oversight and regulatory measures imposed on the financial sector, as well as the large number of geopolitical stress points.”
Scotia is now looking for global economic momentum to start gaining strength next year, bolstered by the resilient U.S. economy, the positive impact on consumers worldwide of lower oil prices, the continued decline in inflation and borrowing costs around the world, currency-led adjustments, and the mounting pressure on governments to expand infrastructure investment and bolster demand.
Editor’s note: For an outlook on how Canada’s provinces and territories will fare in the year ahead, see Report on the Nation in the February 2015 issue of Investment Executive.