TORONTO—Canadian economic growth fell into the red last quarter, largely as a result of the wildfires that stalked across Alberta earlier this year—but according to RBC Economics’ latest Outlook report, the country’s economy is poised to “snap back” over the rest of the year and into 2017.
“The Alberta wildfires and sharp pullback in oil sands production in May took the Canadian economy on a brief detour into negative growth,” Craig Wright, senior vice-president and chief economist at RBC, said. “Yet the recovery should spur a similarly sharp rebound in growth in the latter half of this year and we anticipate that momentum will carry over into next year.”
The bank’s economists expect Canada’s real GDP to grow at an annualized rate of 3.7 per cent in the third quarter of this year and 1.9 per cent in Q4. The economy will then get a further lift from rising energy prices, low interest rates and federal stimulus in early 2017, the forecast says.
RBC said Canadian GDP growth will jump to 1.8 per cent in 2017—compared to 1.3 per cent in 2016—partly as a result of oil prices recovering to $50 per barrel by the end of this year.
For a number of individual provinces, the economic outlook is less optimistic for the remainder of 2016. RBC said it expects the economies of Alberta, Saskatchewan, and Newfoundland and Labrador to contract further this year as they continue to combat low oil prices. All other provinces, except New Brunswick are expected to expand in 2016. Still, the bank said it forecasts growth to become more balanced across the country beginning next year.
“Momentum appeared to slow this spring in several oil-consuming provinces, including Ontario, Quebec and Manitoba, and we lowered our 2016 growth forecasts for eight provinces,” Wright said. “Our 2017 outlook shows more balanced growth across the country, with Alberta and Saskatchewan returning to positive growth and economic activity moderating in British Columbia.”