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Economy Slammed by oil crash, Canada takes major hit in new OECD forecast

The processing facility at the Suncor tar sands operations near Fort McMurray, Alta.

TODD KOROL/REUTERS

Smacked by the oil crash, Canada has taken a big hit in a new OECD economic forecast.

In its updated projections released Wednesday, the Organization for Economic Co-operation and Development cut its outlook for growth in Canada this year to 2.2 per cent, down from 2.6 per cent in its November forecast.

For 2016, the group now sees growth of 2.1 per cent, down from 2.4 per cent.

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"Oil and commodity exporters are facing weaker growth prospects as the result of lower prices," the OECD said.

The collapse in crude prices will help other countries, however.

"Lower oil prices will boost global demand and have created conditions for many central banks to lower interest rates," the group said, noting the rush around the world to slash rates, including those in Canada.

Wednesday's report is the latest in a string of forecasts that underscore the hit to Canada, particularly Alberta, from the rout in the oil market. Already, companies in the oil patch have slashed their budgets and cut jobs.

Among the G7, no other country will be affected to the same extent.

Britain's outlook has been cut to 2.6 per cent this year from 2.7 per cent in the earlier forecast, while the projection for next year is unchanged at 2.5 per cent.

Japan will see marginally better-than-expected growth of 1 per cent this year, and 1.4 per cent in 2016, up from the earlier forecast of 1 per cent.

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Germany, according to the projections, is coming on strong, with a boost in its 2015 forecast to 1.7 per cent from 1.1 per cent, and in next year's projection to 2.2 per cent, up 0.4.

Even France and Italy have been upgraded, with projected growth this year of 1.1 per cent and 0.6 per cent, up 0.3 and 0.4, respectively, and next year of 1.7 per cent and 1.3 per cent, up 0.2 and 0.3.

Forecasts for the United States are the same, at 3.1 per cent this year and 3 per cent in 2016.

"Growth prospects in the major economies look slightly better than at the time of the OECD November 2014 economic outlook, but the near-term outlook is still one of moderate, rather than rapid, world GDP growth," the group said.

"The favourable tailwinds create an opportunity for the euro area and Japan to get back to somewhat stronger growth rates, and on balance the most recent indicators are encouraging," it added.

"In the United States, a cyclical recovery continues, although one-offs like the severe winter weather in the northeast may disrupt the quarterly profile of growth."

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Outside the G7, India is expected to show fast-paced growth of 7.7 per cent this year, and 8 per cent in 2016. Indeed, that's projected to be faster than China's 7 per cent and 6.9 per cent.

Like Canada, the forecast for Brazil has been cut.

"The main class of countries for which near-term growth prospects have worsened since the November 2014 economic outlook is the commodity exporters," the OECD said.

"The interim projections are significantly lower for oil-exporters Canada and Brazil, with short-term growth prospects in Brazil also being restrained by monetary and fiscal tightening and increasing political uncertainty," it added.

"Growth has already slowed in many other oil-exporting countries, and with the fall in commodity prices going well beyond oil, exporters of metals, coal and some agricultural commodities also face less favourable growth prospects this year."

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