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An oil pumpjack sits unused in a field North of Edmonton Alberta February 8, 2013.

Jason Franson/The Globe and Mail

Canadian executives are increasingly gloomy about the prospects for Canada's economy, and are fearful that the recent drop in oil prices will stunt the country's growth in the coming year.

The latest quarterly C-Suite survey reveals the most pessimistic mood in the corner office since mid-2009, when the country was still in the grips of a deep recession.

Almost 40 per cent of the executives surveyed said they expect the economy to decline in the next year, a sharp increase from the 23 per cent who felt that way in December. Last summer, only 3 per cent thought a decline was in the offing.

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The main culprit is the precipitous fall in oil prices, which has knocked the wind out of the oil patch, put Alberta's finances in a precarious position, and caused economic ripples across the country.

"We are certainly going to have a slow-growth year," said Arni Thorsteinson, president of Shelter Canadian Properties Ltd., a Winnipeg-based company that owns commercial and residential real estate across the country, including some in Fort McMurray, Alta. "The impact from the decline in oil prices is substantive because capital investment in the energy market has really been the main driver [of the economy] for the last five years."

Lower oil prices and the lower Canadian dollar should help consumers and exporters, Mr. Thorsteinson said, but many of those benefits can take months or years to come to fruition.

He noted that his firm has investments in hotels, which will theoretically gain if more foreign tourists are attracted by the lower loonie. "But those booking patterns take two years or longer to kick in," he said. "By the time they get around to coming, it could be 2017."

On the other hand, the impact of low oil prices was felt almost instantly in the oil patch, which was stunned by the sudden plunge.

"None of us saw it coming," said Murray Toews, chief executive officer of Bonnett's Energy Corp., a Grande Prairie, Alta-based oil-field services company. As late as last December, he said, the general view was that 2015 would be similar to 2014. Instead, "Boom. The rug was pulled from underneath us."

While some may benefit from lower oil prices, "I don't think that this is good for the country at all," he said. "Whenever you get someone stumbling in any sector of our country it is going to affect us east to west."

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Having learned its lesson from the 2008-09 recession, Bonnett's quickly cut back, trimming 15 per cent of its work force in February.

Bonnett's is certainly not alone, as many oil-sector firms swiftly trimmed staff and reduced spending plans. Indeed, the C-Suite results showed that 41 per cent of companies surveyed have taken specific initiatives in light of the drop in oil prices. The top moves include reducing capital spending, shifting investments and cutting staff.

While there is a broad consensus that Canada's economy is weakening as a result of lower oil prices, the survey also underlines significant regional differences in attitudes. Far more western-based executives – about 46 per cent – say the national economy will shrink in the next year, compared with Ontario where 29 per cent expect a decline.

There is an even greater divide concerning the state of provincial economies. Fifty-six per cent of executives located in the West think their provincial economy will slip in the next year, while only 20 per cent of those based in Ontario feel that that way.

That's no surprise, said Shawn O'Brien, CEO of Cipher Pharmaceuticals Inc., a specialty drug company based in Mississauga. With western energy companies hurt by lower prices, and eastern manufacturers helped by the lower dollar, the impact is clearly uneven.

"I'm not totally negative," about lower oil prices and the low dollar, he said, noting that Cipher's financial results will improve because 90 per cent of its income is generated in the United States, while operating expenses are in Canada. "It's a good thing for us."

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Mr. O'Brien is enthusiastic about a possible further rate cut from the Bank of Canada, which trimmed its key lending rate by a quarter percentage point in a surprise move on Jan. 21. "Any easing the bank can do to help build confidence … will help," he said.

Over all, the C-Suite participants are divided on the interest rate issue. Fifty-one per cent support an additional 25 basis point cut, while 44 per cent oppose it. Proponents underline the benefits of a lower cost of capital and the resulting stimulative effects. Those opposed note the impact on the dollar and the impetus for Canadians to go further into debt.

Bill Thomas, CEO of KPMG's Canadian operations, said the divergence of views reflects the fact that interest rates are just "one tool in the tool box" for fuelling the economy. There are other options that can help, he said, such as boosting infrastructure spending – his preference for giving a "jolt" to the economy.

Mr. Thomas said he is confident that most companies in Canada's oil patch will use what they have learned from past shocks to make it through these tough times. "The best balance sheets will weather the storm, and they will come out of this not only with a stronger business, but lots of great opportunities to grow," he said. "We have some of the strongest, best run organizations on the globe."

About the survey:

The quarterly C-Suite survey was conducted for Report on Business and Business News Network by Gandalf Group, and sponsored by KPMG. The survey interviewed 152 executives between Feb. 23 and March 16, 2015.

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Watch for coverage Monday on BNN and view the full survey.

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