There Are Many Risk Factors as Canada Stares Down a Possible Recession

By Pedwell, Terry | The Canadian Press, July 7, 2015 | Go to article overview

There Are Many Risk Factors as Canada Stares Down a Possible Recession


Pedwell, Terry, The Canadian Press


Recession? What lies ahead?

--

OTTAWA - There are some troubling signals and conflicting messages about the direction Canada's economy will take just as voters are preparing to head to the polls once again.

On Monday, TD Bank said that Canada was likely already in a recession in the first half of this year.

And even though just last week Finance Minister Joe Oliver was dismissing the "R-word," by Tuesday he was softening his stand, saying it's just too early to tell if Canada's economy has, indeed, slid backwards.

Oliver also said Canada is well positioned to deal with another economic downturn, although he acknowledged the country's finances are in a fragile state.

So, what lies ahead for the economy?

Here are some facts:

-- The 2015 federal budget projected a surplus this year of $1.4 billion. However, that was partly because the government stopped setting aside an annual $3 billion contingency reserve. It also assumed there would be nearly $1 billion in savings through the negotiation of new contracts with civil servants. Those savings have yet to be realized and the largest union, the Public Service Alliance of Canada, is currently seeking a court injunction to prevent the government from unilaterally taking much of that money out of employee sick time reserves.

-- Oil prices aren't in freefall, but they don't appear to be on the rise either. While the spring federal budget pegged average crude prices in the $60 to $70 per barrel range, the August crude contract closed Tuesday at $52.33 U.S. per barrel. Continued low oil prices could further erode the federal government's balanced budget pledge if revenues fail to materialize.

-- The 2015 budget assumes 2.0 per cent growth in real GDP this year, based on private-sector forecasts. …

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