An oil-price rout that was sparked by the U.S. presidential election has pushed Canada’s economy toward the edge of a recession.
The Conservative government has cut government spending and increased taxes.
Meanwhile, some analysts warn that a fall in crude prices could drive prices higher, potentially putting pressure on the Canadian dollar.
A report released Tuesday by the Bank of Canada shows Canada is on track to lose a total of 1.5 per cent of its gross domestic product in the next year, a slowdown that could drag the economy into a recession as early as 2018.
The Bank said the Canadian unemployment rate rose to 5.6 per cent last month from 4.6 in September.
Inflation is expected to climb from its current 3.3 per cent rate in 2018 to 5 per cent in 2019.
The report also said that while growth in services, manufacturing and construction has been stronger than in the previous year, the economy has been in a decline since the global economic crisis.
The Canadian dollar has been rising against the U of A dollar in recent months as the Bank measures its economic outlook.
“While we expect to maintain a moderate rate of inflation over the medium term, we remain concerned about the risks associated with an oil price fall, particularly as prices continue to decline,” the Bank said in a statement.
“The Bank of England, which is currently forecasting a rate of 1 per cent inflation, has forecast that this will be a temporary rate of 2 per cent over the coming years.”
The Bank noted that the outlook for inflation is “uncertain” due to uncertainties about the global economy, and that a rise in oil prices could increase the risks to the economy.
Oil prices were at $US48 per barrel on Wednesday, up about $US2 from Tuesday.
The bank added that the recent decline in oil has made it more difficult for the Bank to forecast the long-term outlook for the Canadian oil industry.
It noted that, for the year, oil is currently expected to account for around two-thirds of the economy, which will continue to shrink.
The forecast for oil’s share of GDP is down from roughly three-quarters in 2017.
“It’s important to note that the Canadian economic outlook remains relatively stable in terms of the pace of economic growth,” the report said.
The country has already been grappling with the fallout from the U:s election, with the economy lagging behind the U in the number of jobs created and the number that are actively looking for work.
The unemployment rate has jumped to 9.3 percent, compared to 6.1 percent in November, the Bank forecast.
The government has also been working to help businesses and small businesses, which are a key driver of growth, through tax breaks and other incentives.
It has increased the minimum wage to $15 per hour from $11.50 per hour, and has been working with business groups to create a new national childcare strategy.
And it has announced an additional $7 billion to help create jobs and reduce poverty.
In the U., the federal election saw a spike in political rhetoric on the campaign trail, with a series of controversial statements including promises to build more pipelines, to slash taxes on the rich and to allow people to keep their homes.
And in recent weeks, the Conservative government’s economic plan has been scrutinized for its fiscal projections and for its policies that are perceived to favour the wealthy at the expense of others.