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Motorists fuel up their cars at a gas station in downtown Toronto.Fred Lum/The Globe and Mail

Canada's economy is softening, the OECD warned today in yet another signal of how the collapse in oil prices is hurting the country.

The Organization for Economic Co-Operation and Development didn't blame the softness on crude, but we all know that's what's behind it, and why economists in general have been slashing their projections for growth in gross domestic product.

The OECD released its monthly composite leading indicators, which signal stronger times for the euro zone, the United States, Britain and Japan.

"On the other hand, CLIs signal growth easing in China and Canada, albeit from relatively high levels," the group said.

The plunge in oil prices is taking its toll on everything from jobs to government finances.

This has already played out in the latest Alberta budget, and will be a key point in the current election campaign, and will of course factor into the April 1 federal budget.

The Bank of Canada has warned of the slower pace, going so far as to cut its benchmark rate in a surprise January move, while the hit from oil is also showing up in monthly jobs reports.

And first-quarter economic growth could well turn out to be negative, though there's no suggestion of something uglier there.

In its latest forecast issued this week, Capital Economics, which is on the gloomier side of projections, predicted Canada's economy will expand by just 1.5 per cent this year and 1 per cent in 2016.

Other economists have also cut their forecasts, though they're not as bleak.

"Canada's economic outlook has deteriorated significantly over the past few months," Capital Economics said.

"With energy prices showing no signs of a rebound, oil producers have slashed plans for future investment and employment."

The group also warned Canadian governments, and Alberta, in particular, against taking the type of austerity measures that crippled parts of Europe.

"This is the time when we would expect policy makers to try and offset such a major negative shock to the economy," its report said, noting there's now just "limited scope" for further action by the Bank of Canada.

"More worryingly, following the lead of other provincial governments, Alberta is attempting to offset the decline in oil-related revenues by hiking taxes and cutting spending," Capital Economics said.

"This is the sort of foolish fiscal austerity that backfired so badly in the euro zone."

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