The Americas

Bank of Canada: Economy will shrink due to Alberta wildfires

FILE - In this May 13, 2016 file photo, Canadian Prime Minister Justin Trudeau, left, and Fort McMurray Fire Chief Darby Allen look over a burnt out car during a visit to Fort McMurray, Canada.  Canada's central bank says the Canadian economy will shrink and become much weaker than expected because of Alberta's devastating wildfires, which shut down its oil sands production. The Bank of Canada, which kept its key interest rate on hold Wednesday, May 25,  said its preliminary assessment is that the destruction and halt to oil production will knock about 1 1/4 percentage points off real GDP growth in the second quarter.(Jason Franson/The Canadian Press via AP) MANDATORY CREDIT

FILE - In this May 13, 2016 file photo, Canadian Prime Minister Justin Trudeau, left, and Fort McMurray Fire Chief Darby Allen look over a burnt out car during a visit to Fort McMurray, Canada. Canada's central bank says the Canadian economy will shrink and become much weaker than expected because of Alberta's devastating wildfires, which shut down its oil sands production. The Bank of Canada, which kept its key interest rate on hold Wednesday, May 25, said its preliminary assessment is that the destruction and halt to oil production will knock about 1 1/4 percentage points off real GDP growth in the second quarter.(Jason Franson/The Canadian Press via AP) MANDATORY CREDIT  (The Associated Press)

Canada's central bank says the Canadian economy will shrink and become much weaker than expected because of Alberta's devastating wildfires, which shut down its oil sands production.

The Bank of Canada, which kept its key interest rate on hold Wednesday, said its preliminary assessment is that the destruction and halt to oil production will knock about 1 1/4 percentage points off real GDP growth in the second quarter. In April, the bank had forecast 1 percent growth in the quarter.

The bank expects the economy to rebound in the third quarter as production resumes.

Officials hope to start a phased in return of 80,000 evacuees to the main oil sands city of Fort McMurray starting June 1. The Alberta oil sands have the third-largest reserves of oil in the world.