This year, Canadians are becoming richer day-in day-out. However, the countrys economy is going down the drains. Most economists in Canada have been predicting a shift during the second quarter for quite some time. There are a few reasons why this is happening to Canadas finance industry.
For instance, the Bank of Canada was greatly affected by the first filthy quarter as a result of the changes in oil price. This was later succeeded by the 0.25% interest rate from the insurance that the bank took sometime in January. Instead of focusing on this insurance, the bank would have dedicated this time in mending the patch created by oil price fluctuation.
End of June statistics revealed that the GDP fell by 0.1% in April. This was exactly the opposite of what economists had predicted. In fact, the GDP shrank by 0.6% during the first 3 months. Unfortunately, the economy did not improve in May or June and it is expected to shrink during the next 6 months.
This has raised some questions especially regarding the insurance the bank took in January. How did Canadian economy reach to this point? There are a few reasons which can explain this decline.
First, most economists underestimated the impact of reduced oil prices. The on-again, off-again recovery in the US which expected to grow at a very high rate failed. The China products are making the prices of local commodities to remain low.
Moreover, most of the investing companies in the region are very uncooperative. This would have been very important in boosting the manufacturing industry which had shrank due to high oil prices in past years.
Lastly, the interest rates might be so small such that the overall interest is not promoting investment in the region. These small interest rates were expected to attract more businesses to the region. The best move for Canada is to wait and see if there will be improvements in finance sector.