- Oil exports to shrink back to pre-boom levels
- Pain from oil crash ‘will spread across the country’
- Non-energy industries should benefit
The oil crash has wiped out about $60 billion of Canada’s annual national income, or about $1,800 per year for every Canadian, the Bank of Canada says.
In a speech in Edmonton Wednesday, bank deputy governor Lynn Patterson also said Canadians shouldn’t expect oil prices to bounce back to the levels seen before the crash, when they topped US$100 a barrel.
“Given the supply dynamics that we are currently faced with, it is highly unlikely that we will see those levels again in the coming years,” Patterson told an audience at the Edmonton Chamber of Commerce.
Bank of Canada deputy governor Lynn Patterson says it will be a few more years before Canada's economy rebalances following the oil price crash. (Photo: Bank of Canada)
The loss of income and wealth has been uneven, she said, with the oil-producing regions taking the brunt. But “over time, the losses in income and wealth associated with the price decline will spread across the country,” she said. She expects households will pull back on spending.
"As their wealth and incomes decline, households will likely restrain their spending and we will see lower, but still positive, consumption growth," Patterson said.
She estimates it will take another two years or so for the oil price shock to work its way through the economy, and for the economy to reach a new balance.
When it does reach that balance, Patterson said, things will look much like they did before oil prices boomed to the $100 mark a decade or so ago. Energy exports will account for 40 per cent of all exports, down from 50 per cent in 2014 and roughly where it was in the pre-boom days.
How much damage Canada will suffer overall "will depend on how much capacity is rebuilt in the non-commodity sector," Patterson said.
On that front, there are positive signs. With the lower loonie, non-energy manufacturers are seeing sales rise. They hit a record high of $53.1 billion this January, rising 2.3 per cent in a month, well ahead of economists' expectations.
However, manufacturing employment has not recovered since the financial crisis of 2008, and the low loonie hasn't yet changed that.
This was the first public event held by a Bank of Canada governor since the federal budget was tabled last week in Ottawa.
Patterson noted in her speech that the bank's updated economic projections in its upcoming monetary policy report would account for billions of dollars worth of fiscal measures announced in the budget.
In January, the Bank of Canada forecast about 1.5 per cent growth for 2016 followed by 2.5 per cent growth in 2017.
— With files from The Canadian Press