Think-tank sees more disappointment ahead for Canadian economy

Oil-price rout and weak investment drag outlook down

OTTAWA — The Canadian economy continues to deliver what central bank governor Stephen Poloz has described as “serial disappointment.”

The post-recession road to recovery has been a bumpy one, and it now looks like we could be heading back in that direction.

The Conference Board of Canada on Wednesday forecast economic growth of just 1.6% this year, which the Ottawa-based think-tank said is down from its March estimate of 1.9%. The latest growth outlook is the worst since 2009 — the tail end of the previous downturn — and more disappointment could lie ahead.

Topping the board’s list of suspects dragging down economic activity are the oil-price rout and weak business investment by Canadian companies.

Adding to those worries are plunging stocks and slowing economic growth in China, and the yet-to-be-completed debt rescue for Greece.

Meanwhile, many economists have been disappointed by the pace of the U.S. recovery — the main element required to lift exports from this country.

“There has been much speculation on whether the Canadian economy has dipped into recession,” said Matthew Stewart, associate director, responsible for the national forecast.

“With Canada’s potential output growth slowing due to an aging population and lacklustre investment outside of the energy sector, real GDP growth is not expected to exceed 2.3% at any point over the next five years.”

Poloz, the central bank governor, has acted on his “serial disappointment” concerns by cutting interest rates twice this year. The bank’s key lending level now sits at 0.5%.