Royal Bank cites low oil prices as it downgrades GDP forecast to 1.7%

RBC expects solid consumer spending, stronger exports and federal government stimulus, but lower than estimated oil prices this year are dragging down its economic forecast.

Bank's quarterly economic forecast predicts $40 US WTI this year, $57 US next year

The Royal Bank of Canada is lowering its economic forecast for Canada because oil prices are lower than previously estimated. (Reuters)

The Royal Bank says low oil prices will make 2016 more challenging for Canada's economy than previously thought.

The bank has lowered its forecast for this year's gross domestic product to just 1.7 per cent.

That's down from RBC's December forecast of 2.2 per cent growth this year.

RBC continues to expect Canada's economic growth will be underpinned by solid consumer spending, stronger exports and stimulus from the federal government.

But it says oil prices were lower than estimated early this year and they will weigh on business investment.

The bank's latest quarterly economic forecast estimates the average price of West Texas Intermediate crude will be US$40 per barrel this year — $12 less than its previous forecast in December.

RBC is also lowering its 2017 oil price estimate to $57 per barrel from $62.

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