07/09/2015 11:27 EDT | Updated 07/09/2016 05:59 EDT

IMF slashes outlook for Canadian economy

As uncertainty in Greece and China's stock market crash wallop global confidence, and more economists here in Canada predict a recession, the IMF is cutting its outlook for the world economy and taking an axe to its Canadian forecast.

The International Monetary Fund now expects the global economy to grow 3.3 per cent in 2015, a drop of 0.2 percentage points from its April forecast. For 2016, it maintained its 3.8 per cent prediction.

The IMF turned especially gloomy when it came to Canada. It now expects the economy to grow just 1.5 per cent in 2015 versus its prediction in April of 2.2 per cent. 

"A setback to activity in the first quarter of 2015, mostly in North America, has resulted in a small downward revision to global growth," wrote the IMF in a release Thursday. 

Both the U.S. and Canada had treacherous first quarters. U.S. GDP shrank 0.2 per cent between January and March, but likely due to one-time factors such as the harsh winter weather and port delays. Canada's economy contracted 0.6 per cent in the first quarter, the first contraction in four years and the largest since 2009. That, of course, was the consequence of a dramatic drop in oil prices and subsequently a huge pullback in business investment. 

In early trading Thursday, West Texas Intermediate traded at 52.67 a barrel, up by about a dollar. But oil prices fell sharply earlier this week nearly eight per cent, reversing a two-month rebound. It's still a far cry from the days of $104/barrel oil in late 2014.

'Likely' in recession

With Statistics Canada reporting negative output in April and the second-worst trade deficit ever, more economists in this country are using the dreaded "r" word for the second quarter. Strictly speaking, a recession is defined as two straight quarters of negative growth. 

"It is likely the economy was in recession in the first half of the year," said TD senior economist Randall Bartlett.

Capital Economics and the Bank of America have both predicted a recession as well. 

The recent data points now have seven of 24 economists surveyed by Bloomberg forecasting an interest rate cut. The Bank of Canada will make its next decision to cut, hike or hold on July 15. The bank has one more data point to weigh Friday when Statistics Canada reports June jobs numbers.