OECD reduces estimates for Canadian economy, says growth will lag United States

OTTAWA – The OECD has reduced its estimates for Canadian economic growth this year and next.

The Organization for Economic Co-operation and Development currently expects a 1.4 per cent advance this year for Canada — down four-tenths of a point from its November estimate of 1.8 per cent.

The multinational forecasting group has also reduced its estimate for Canada’s economic growth in 2014, now expected at 2.3 per cent — one-tenth of a point below the previous estimate of 2.4 per cent.

In both this year and next, the OECD expects Canada’s growth to trail the United States, where the OECD expects an 1.9 per cent advance in 2013 and 2.8 per cent in 2014.

Both countries will outpace the 17 European Union countries that use the euro.

The OECD predicts the eurozone economy will shrink by 0.6 per cent this year, after a 0.5 per cent drop in 2012.

In its half-yearly update, the international body said Wednesday that Canada will benefit from business investment due to low capital costs, still-high commodity prices and improving confidence.

External demand is also expected to contribute because of expanding U.S. and non-OECD markets as well as a depreciating exchange rate.

It expects Canadian household spending to remain unchanged, however, as easy monetary policy will be offset by tightening mortgage rules, debt reductions and a consolidating public sector.