Canada is headed for a rocky year as low oil prices continue to drag on economic performance, the chief economists of some of Canada's biggest banks said Tuesday.
Bank of Montreal chief economist Douglas Porter told a morning gathering of leading economists that it's going to be a "very close call" whether the fourth quarter of 2015 saw any economic growth.
Canada's resource sector has been slammed as the price of crude has fallen from a high above $105 US a barrel in June 2014 to below $40 US over the past few months, just as other commodities are at or near multi-year lows.
Speaking at an event hosted by the Economic Club of Canada, Porter said it looks like last year was one of the worst years for economic growth in decades outside of a full-on recession, and Canada is looking at a 2016 growth rate not much higher than last 2015.
Loonie's dive may not be done
The loonie, which has plunged as the price of oil has declined, also has further to fall, he said.
The negative outlook for oil, the differing policy directions between the Canadian and American central banks, and the strengthening American economy mean the loonie will fall below 70 cents US before it begins to recover, Porter said.
"The last line of defence for the Canadian dollar would be some stability in oil prices and resource prices, and we just don't see that stability over the next few months."
Canada's dollar has been trading near 11-year lows for weeks but has remained above 71 cents US since 2003.
Craig Wright, Royal Bank of Canada's chief economist, said the cheap loonie and the American economic recovery should provide a boost to Canadian exports in the near future, although such a rebound hasn't materialized so far.
Wright said Canada will depend more than ever on its largest trading partner for export growth, because of the faltering performance of the rest of the world including the European Union and China.
"The U.S is the bright shining star," he said. "But it's not a very bright sky."
CIBC chief economist Avery Shenfeld said 2016 will be a disappointing year for the global economy at large, and Canada won't be spared.
Yet by the end of the year, he said, investors may see better returns as the world looks ahead to a brighter 2017.