The Bank of Canada announced a somewhat grim outlook for the economy Wednesday, pointing to economic chaos around the world and problems at home such as housing debt as key impediments to faster growth.
Bank of Canada Governor Mark Carney released the central bank's Monetary Policy Report in Ottawa.
He said the slowing economy in China -- a major customer for Canada's natural resources such as copper and zinc -- as well as ongoing financial woes in Europe, the U.S. and India and Brazil, all play a role in hindering Canadian growth.
Carney told a news conference that "global headwinds" are restraining the Canadian economy but domestic factors such as consumer spending and business investment are predicted to keep the economy expanding at a moderate pace.
"However, their pace will be influenced by external headwinds, notably the effects of lower commodity prices on Canadian incomes and wealth, as well as by record-high household debt," Carney said.
He also said Canadian businesses that deal in exports are too closely tied to slow-growth markets, such as the U.S., and need to work harder to find new, more profitable markets for their products.
The bank expects economic growth will slow to 2.1 per cent this year from 2.4 per cent in 2011, and advance by a moderate 2.3 per cent and 2.5 per cent in 2013 and 2014.
Craig Wright, senior vice-president and chief economist at RBC, said while the economic outlook is far from rosy, Canada is still doing well compared to many other developed nations.
"I think the tone is one of cautious optimism," he told Â鶹´«Ã½ Channel. "There are a number of risks outside our borders which we unfortunately have very little control over and those risks could continue to dampen overall confidence and with that keep the economy a little bit slower than it would otherwise be."
BNN's Kim Parlee said the report shows that lower than expected oil prices are also expected to buffet the economy's advancement.
Previous expectations were that crude would sell at roughly $104 per barrel for the foreseeable future. But Wednesday's report cut those expectations considerably to between $87 and $89 per barrel.
"Oil prices and of course the oil business drives the Canadian economy right now and it's responsible for a lot of what's been happening out west," Parlee told Â鶹´«Ã½ Channel.
The lower prices for exports from Canada's oilsands "trickle into how the economy does out west, how the economy does in the rest of Canada and how much money people have in their pockets," she said.
Some analysts and oil officials have said that when oil prices slip below $90, some oilsands projects cease to be profitable.
Without going into specifics, the report also suggests job creation will be modest throughout the remainder of 2012.
"This outlook for the Canadian economy is weaker over the near term than anticipated," the report states.
"As a result, the Canadian economy is expected to continue to operate with a small amount of slack for somewhat longer than previously anticipated."
The economy will not return to full capacity until the second half of next year, the report states.
Carney also cited housing as an ongoing concern for the Canadian economy, highlighting it in the report as the single biggest risk to Canadian households and warning that the household debt ratio is still on the rise.
However, he pointed out that the central bank is more comfortable with tighter mortgage rules brought in by Finance Minister Jim Flaherty recently.
