OTTAWA: Canada’s economy is expected to return to full capacity “around the end of 2016,” after being dealt a setback by the plunge in oil prices, the central bank chief said on Tuesday (Wednesday in Manila).
In a speech to the Charlottetown chamber of commerce, Bank of Canada governor Stephen Poloz said last year’s drop in the price of Brent crude oil from above $100 to below $50 contributed to massive job losses in Canada’s oil patch.
This led to weaker growth in housing and consumer spending, and manufacturers that supply equipment to the oil sector faltered.
When the latest figures are released on May 29, first quarter Canadian output is expected to have been “basically flat,” Poloz said.
The economy, he predicted, will “rebound partially” in the second quarter and should be “back on track to reach full capacity around the end of 2016,” bolstered by an interest rate cut in January and a relatively low Canadian dollar, he said.
But Poloz warned: “The implications for income and investment (of low oil prices), and the adjustments they’re causing across sectors and regions, may take years to work themselves out.”
“We probably still haven’t seen the full impact of the oil price shock reflected in the employment data,” he added.