Article content continued

The global plunge in oil prices, which began in mid-2014, hit resources-dependent provinces like Alberta and Newfoundland and Labrador the hardest and pushed the country’s overall economy into a two-quarter recession in 2015.

The Bank of Canada responded to the collapse in the energy sector by cutting its key interest rate twice last year — taking it to 0.5 per cent.

“As the contraction in the resource sector slows, activity in the rest of the economy is projected to gain traction,” the OECD said Wednesday in its latest Economic Outlook.

Crude prices are now trading off their lows.

The new Liberal government in Ottawa, elected in October, has promised to spend up to $120 billion on infrastructure projects over the next 10 years.

The OECD gives a nod to the Liberal government’s fiscal stimulus plans, which it says could boost GDP growth by about 0.5 per cent in both 2016 and 2017 — similar to Ottawa’s own forecasts.

‘The moderately expansionary policy stance in the 2016 federal budget will help the economy return to full employment,” the OECD said.

“In the medium term, however, in light of the provinces’ unfavourable debt dynamics, the government should adopt ambitious medium-term debt and budget objectives to ensure that general government debt remains sustainable.”

But the OECD also recommends Canada’s central bank begin gradually raising its trendsetting lending level.

“Gradual increases in policy interest rate are assumed from late 2016 to stabilize inflation around two per cent.”