OTTAWA -- Canada's economy is struggling amid mounting difficulties from abroad that have weakened commodity prices, as well as some homegrown problems, the Bank of Canada said Wednesday.
The central bank's latest monetary-policy overview of global and domestic conditions makes clear Canada is a victim of global problems, but adds some of the country's internal strengths are running out of steam.
In raw numbers, the bank expects economic growth will slow to 2.1 per cent this year from 2.4 per cent in 2011, and only advance by a still moderate 2.3 per cent and 2.5 per cent in 2013 and 2014.
A continuing source of weakness is increasing household debt, which will temper consumption, and soft export performance, which is being hurt by slowing growth in the U.S., emerging markets and Europe.
As well, world oil prices are off by about 15 per cent since April, making Canadians a little poorer, the bank said.
Cheaper oil has given car owners a break at the gas pump, bank governor Mark Carney conceded at a news conference following the release of the policy document, but the overall impact on the economy is negative.
"It's one of the reasons why we've taken down our forecast for Canada," he said. "It impacts investment, it impacts government revenues, it impacts incomes, it impacts linkages across the economy.
"I wouldn't overplay that," he added. "(Commodity prices are) still elevated relative to historic levels, (and) there are still major projects that are going to continue and we still have an economy that is growing around its potential, so let's not get all doom and gloom here."
Carney's new take on the economy is more pessimistic than his rosy April outlook, when he foresaw 2.4 per cent growth for this year and next.
Starting with the first few months of this year, the central bank has had to lower projections on growth for five consecutive quarters, ending in the spring of 2013.
That's still too rosy for many private sector analysts, who responded to the report with unusual contrariness, quibbling with the bank over the strength of growth, domestic spending and the housing sector. All will be weaker than the bank assumes, said several analysts.
-- The Canadian Press