TORONTO — The CEO of the Bank of Montreal says doom-and-gloom about the effects of the oil price shock are overblown because Canada’s economy is diversified enough to withstand the downturn in the energy patch.
Bill Downe says it’s undeniable that the prolonged decline in the price of crude has had a significant negative impact in certain regions of the country — for example the oil-producing provinces, where employment and consumer confidence have taken a hit.
However, Downe says Canada’s economy is “more diversified than we’re giving it credit for.”
“We’ve seen Alberta go through this cycle,” Downe said in an interview in Toronto on Tuesday. “It’s well understood what the impact is and it doesn’t define the Canadian economy.”
During his address earlier Tuesday to shareholders at the bank’s annual meeting, Downe said he expected the economy to grow by about two per cent this year, in spite of lagging energy prices.
His forecast contrasts with the Bank of Canada’s prediction of 1.4 per cent economic growth this year, though that did not take into account new spending in the federal budget released last month. The central bank is expected to update its projection when it releases its new monetary policy report April 13.
“Canada’s resource wealth has not gone away,” Downe told shareholders. “A market price correction does not mean that an enviable national asset has suddenly become a liability.”
Downe said economic fundamentals remain strong, noting that low interest rates, steady job growth and low fuel prices have boosted consumer spending in most regions of the country.
Downe blamed analysts and news reports for the overly pessimistic picture of how low oil prices will affect both the economy and the bank.
“Analysts and the financial media have been singularly focused on the impact of lower oil and gas prices — and commodity prices generally — on our bank and the interconnected regional economies that define our North American footprint,” he said.
“The level of apprehension about markets has been disproportionate to the evidence — largely, I think, because we’ve all becomes captives to the 24-hour news cycle.”