S&P report: Low oil prices take toll on Canada's growth prospects

Canada's economy has come into 2015 grappling with sharply lower oil prices that will reduce business investment and increase unemployment in the country's oil-producing regions, according to a report from Standard & Poor’s Ratings Services. This sets the stage for slower income growth and falling inflation, which will likely lead to revenue shortfalls for Canada's national and regional governments and slow their recent progress in balancing their budgets.

There will be some economic benefits from cheap oil, however. Among them are the increased consumer and business spending that Standard & Poor's Ratings Services expects to see as lower oil prices improve consumers' purchasing power and reduce business production and transportation costs. In addition, the rising US economy could benefit from lower oil prices, which would spell good news for Canadian exports to the US.

"However, overall, we believe the downsides to falling oil prices – which include stalled employment, especially in oil-producing provinces; higher prices for imports; and lower revenues for federal and provincial governments – pose more risk to Canada's economy than the benefits can offset," said Robert Palombi, Standard & Poor's global fixed income analyst, in the report titled, "Canada Economic Outlook: Cheap Oil Subdues Growth Prospects."

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