IMF picks Canada to top G7 growth
GDP expected to gain steam this year amid surge in strong economic data
Add the International Monetary Fund to the list of institutions that have boosted their expectations for Canada’s economy this year.
The IMF now expects Canada’s gross domestic product to grow 2.5 per cent this year, leading G7 growth, according to its latest World Economic Outlook. That’s up from the prior forecast of 1.9 per cent released in April.
The IMF expects Canada’s economy to grow 1.9 per cent in 2018, a slight decrease from the April forecast of 2.0 per cent.
The IMF boosted its 2017 outlook after taking stock of Canada’s surge in strong, year-to-date economic data. “Buoyant domestic demand boosted first-quarter growth to 3.7 per cent and indicators suggest resilient secondquarter activity,” the IMF said.
The Bank of Canada raised its policy interest rate by 25 basis points to 0.75 per cent on July 12. It was the first hike to the bank’s overnight target rate in seven years.
Many economists expect that Canada’s central bank is on a path to bring the rate up to 1.5 per cent by sometime next year.
In the July edition of its quarterly Monetary Policy Report, the Bank of Canada increased its forecast for 2017 Canadian GDP to 2.8 per cent, up from its April outlook of 2.6 per cent.
Others have been boosting their views on Canada. In June, the Paris-based Organization for Economic Co-operation and Development bumped up its call on Canadian 2017 GDP growth to 2.8 per cent, double last year’s pace.
The IMF’s revised outlook was contained in its latest World Economic Outlook, a quarterly report that sets out the organization’s projections for global and countryspecific growth.
The IMF has noticed that as the global economy recovers from a cyclical slowdown, there is less need for fiscal policies that are designed to encourage growth, such as low interest rates.
Overall, the IMF said global output is projected to grow by 3.5 per cent in 2017 and 3.6 per cent in 2018. Both estimates are unchanged from the IMF’s April outlook.
On a country specific basis, the big loser seems to be the United States. The IMF forecasts the U.S. economy will grow 2.1 per cent in 2017, down 0.2 percentage points from its April forecast. Growth is expected to be 2.1 per cent in 2018, down from a prior estimate of 2.5 per cent.
“The major factor behind the growth revision, especially for 2018, is the assumption that fiscal policy will be less expansionary than previously assumed, given the uncertainty about the timing and nature of U.S. fiscal policy changes. Market expectations of fiscal stimulus have also receded,” the IMF said.
Buoyant domestic demand boosted first-quarter growth ... and indicators suggest resilient second-quarter activity.