Canada's budget watchdog predicts the country’s unemployment rate will rise next year, the result of slower-than-expected economic growth.
Parliamentary Budget Officer Kevin Page maintained his outlook for the economy this year but lowered it for it for 2013 and 2014 in a new report Monday and predicted the Bank of Canada won’t raise its benchmark interest rate until early 2015.
"With inflationary pressures well contained and Consumer Price Index (CPI) inflation remaining below its two per cent target, PBO expects the Bank of Canada to maintain its policy interest rate at one per cent through the first quarter of 2015," it said.
The PBO forecast growth in real gross domestic product of 1.9 per cent this year, 1.5 per cent next year, down from the 1.6 per cent growth prediction in its April outlook, and two per cent for 2014, a drop from 2.2 per cent.
That would translate into a drop in the value of all goods and services produced in the Canadian economy annually of about $22 billion.
It predicted the current unemployment rate of 7.4 per cent would rise to 7.6 over the next year before beginning to decline, reaching 6.5 by 2017.
Page says he anticipates growth will have slowed to an annual rate of 1.6 per cent in the second half of this year, after slowing to 1.8 per cent in the first half.
That's at the bottom of most economic forecasts and well below the Bank of Canada's projections of growth rates of 2.2 per cent in 2012 and 2.3 and 2.4 per cent in the two years after that.
The PBO says the removal of government stimulus has resulted in a loss of about one percentage point of growth from the economy.
It also agreed with the government’s forecast that Ottawa will eliminate its budget deficit in the 2015-16 fiscal year.
The PBO's report was issued the same day as Finance Minister Jim Flaherty said lower commodity prices are impacting his government's revenues, but not enough to derail its deficit elimination plans.