The Globe and Mail recently did an interesting feature with the stories to watch in 2015. In this 5-part series, I will give you the key factors to keep an eye on in the various markets. First up…
THE ECONOMY
David Parkinson from the Globe and Mail writes that at first glance 2015 looked to be promising for Canada’s economy – there’s optimism for the future. Then oil – one of Canada’s largest exports – took a downward spiral causing many to wonder how the recovery will unfold.
With the drastic plunge in oil prices, economists fear that this could put a serious drag on our national income and investments. In early December, it was estimated that if the decline remained at the level it was then, Canada’s economic growth would reduce by about one-third of a percentage point. Since that estimate, crude has dropped even further. If oil should continue to decline or stay down for a prolonged period, the forecast for 2015 real growth is closer to the 2 percent mark.
In comparison, our U.S. neighbours – the worlds largest consumers of oil – will benefit from the drop in oil prices. The U.S. economy is forecasted to grow 3.6 per cent in 2015, and in stark opposition to our situation, if prices continue to drop, their growth could rise even further. Douglas Porter, chief economist at the Bank of Montreal said, “[2015] will mark the biggest shortfall of Canadian GDP growth versus the U.S. since 2003.”
This will most likely mean that the Bank of Canada will hold off on increasing the interest rates at least a couple of quarters longer than the U.S. Federal Reserve, who was forecasting an increase mid-year, but may now be rethinking that time frame based on the global instability at present. As a result, this will put more pressure on the Canadian dollar, pushing it lower, giving a competitive edge to a broad range of Canada’s non-energy exports – which will stand to benefit from the strengthening U.S. demand.
It’s all very complicated and every day we here from various economists and leaders with their opinions of how this will all play out. Stay tuned.
Next up…The Markets
