The economics team at Canada’s largest bank is warning that the economy will be slower than it previously expected.

RBC Economics has trimmed its forecast for 2019 to 1.5% growth from its previous expectation of 1.7% with the sluggish energy sector the main drag.

Softer consumer spending is also expected as households respond to higher interest rates.

While a downgrade in growth forecast always comes over as dramatic, RC says that the energy-impacted slowdown is not likely to be the same as when energy prices began falling earlier this decade.

"The impact of the energy-sector weakness on the Canadian economy is more limited when compared to the previous oil downturn in 2015 and 2016," said Craig Wright, Senior-Vice President and Chief Economist, RBC. "Our forecast assumes that oil prices will hold around current levels throughout 2019 and grind higher in 2020."

Positive notes
It’s not all bad news, with the labour market set to remain strong and US growth of a projected 2.4% that will support Canadian exports.

The national slowdown will also be surpassed by some regions, especially coastal provinces.

Leading the way will be British Columbia where RBC expects 2.5% despite the continued weakness in the housing market where sales dropped 25% in 2018

Newfoundland and Labrador is expected to bounce back after a weak showing in 2018 with a real GDP growth forecast of 2.3% in 2019 – the second-highest pace in the country.

However there are global uncertainties that could still derail growth expectations and RBC Economics says investors remain skittish and central banks continue to be cautious.

 

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