As the Canadian dollar continues to tumble due to low oil prices and the U.S. Federal Treasury’s Wednesday rate hike, economists at two Canadian banks predict the national economy will start showing more signs of life in 2016 as export demands increase somewhat.
B.C. is projected to lead the way among the provinces even as the housing market cools off, according to a December 17 report from TD Economics.
The bank predicts real GDP will rise 2.5% in B.C. next year compared with its estimate of 2.2% for 2015. Next year’s growth rate still falls short of 2014, when B.C.’s economy grew 3.2% before oil prices began plummeting.
Nationally, real GDP is expected to rise 1.7% while Alberta’s economy is poised to grow at a rate of 0.6%.
Ontario and Quebec are expected to follow B.C. in real GDP growth at rates of 2.4% and 1.7%, respectively.
“The Canadian economy showed some renewed life in the third quarter, but the road ahead will be a challenging one. Our outlook calls for exports to take the lead as business investment slowly recovers and the housing market cools,” the report said.
The Bank of Canada has previously expressed surprise that the lower loonie, which fell below US$0.72 Thursday for the first time since 2004, hasn’t resulted in a bigger boost to exports.
The TD report noted other nations have also seen currencies fall against the U.S. dollar, giving them similar competitiveness in the American market.
“Next year won’t see the greatest impact (for exports). In part, that reflects the current struggles of U.S. manufacturers, who are not growing their orders
from Canadian suppliers that are integrated into their production chains,” said CIBC’s own quarterly report, also released December 17.
CIBC economists Benjamin Tal and Nick Exarhos wrote that any overly optimistic forecasts for 2016 are “based largely on wishful thinking.”
“The collapse in energy sector capital spending that was the primary driver of 2015’s anemic growth isn’t likely to be reversed next year, or even in 2017. And outside of the oil patch, a turn in investment will be delayed by the recent softening in corporate profitability.”
