Newspaper article The Canadian Press

Editorial Exchange: Stimulus Required for Canada's Weak Economy?

Newspaper article The Canadian Press

Editorial Exchange: Stimulus Required for Canada's Weak Economy?

Article excerpt

Editorial Exchange: Stimulus required for Canada's weak economy?

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An editorial from the Halifax Chronicle Herald, published July 8:

All eyes will be on Bank of Canada Governor Stephen Poloz next Wednesday.

Six months ago, the central bank surprised economists by dropping its benchmark rate a quarter point, to 0.75 per cent. The move was meant to help cushion a Canadian economy hit hard by a steep fall in oil prices, Mr. Poloz explained in January.

The negative impact in the oil sector -- on jobs, investment and export income -- was so significant, he said, that the central bank foresaw first half GDP growth of just 1.5 per cent.

Six months later, that forecast, unfortunately, seems unrealistically rosy.

Canada's economy contracted by 0.6 per cent in the first quarter, then by a further 0.1 per cent in April.

Economists say the numbers for May, when the country posted a near-record $3.34 billion trade deficit, and June, are likely to be similarly dismal. Many predict Statistics Canada will report a second full quarter of GDP contraction when they report in September.

Two consecutive quarters of economic contraction are the definition of a recession.

Oil prices, which had recovered somewhat, have dipped sharply again. China's flagging economy means a drop in demand. A possible Greek exit from the euro has markets frightened. At the same time, U.S. oil production is projected to rise this year and next, while a potential international deal with Iran, which has huge oil reserves, could remove sanctions from that country and so increase supplies even further. …

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