IMF cuts growth forecast
Economic prediction for Canada down to 1.5% mainly due to oil The International Monetary Fund has lowered its economic growth forecast for Canada despite a strong start to the year.
The IMF also lowered its global outlook, citing the low price of oil and political tensions in many parts of the globe.
The IMF now expects Canada’s economy to grow by1.5 per cent this year and by 1.9 per cent next year. That’s better than last year’s 1.2-per-cent growth rate, but less than the international agency’s January estimate, which projected Canada would grow1.7 per cent in 2016 and 2.1per cent in 2017.
The IMF said Canada will continue to struggle with the impact of lower oil, but it would be partially offset by a more competitive currency and increase in government spending.
The Washington, D.C.-based agency’s forecast comes a day ahead of an expected uptick in the Bank of Canada’s view of the economy.
Following a slower-than-expected end to 2015, Governor Stephen Poloz lowered the central bank’s forecast for Canada’s economy to 1.4 per cent for 2016 and 2.4 per cent for 2017. Both were 0.2 percentage points lower than the bank’s fall estimate.
Canada’s economy has surprised on the high side since the start of the year, with manufacturing, exports and jobs all making gains. As well, an additional $11 billion in spending in the federal Liberal’s March 22 budget should boost Canada’s performance by 0.5 percentage points in 2016, federal officials estimated.
The central bank is widely expected to raise its outlook Wednesday although its trend-setting interest rate, currently at 0.5 per cent, is unlikely to change, Bloomberg said.
Private sector economists are forecasting 1.6-per-cent growth for 2016, according to Bloomberg.
The IMF lowered its estimate for global growth to 3.2 per cent from 3.4 per cent at its January meeting, cutting its forecast for most advanced economies, including the United States.
The slump in oil prices, which fell a further 32 per cent between August 2015 and February 2016, was a key factor it in its worsening view, the IMF said. The agency acknowledged oil prices improved in March, too late to be included in its current outlook.