IMF sees Canadian GDP edging higher

OTTAWA • Despite eking out only meagre growth in 2015 after a first-half downturn, the Canadian economy is expected to keep pace with many of its Group of Seven counterparts this year and next, according to the International Monetary Fund.

Still, that IMF forecast — tempered by the overall negative impact of the global collapse in oil prices and the ongoing slowdown in China — shows output in Canada rising by only 1.7 per cent in 2016, unchanged from the Washington- based agency’s October f orecast, while growth next year should come in at 2.1 per cent, down from the previous estimate of 2.4 per cent.

In its latest World Economic Outlook published Tuesday, the IMF estimates Canada ended 2015 with growth of 1.2 per cent — slightly better than a 1.1-per-cent annual ad- vance expected by the Bank of Canada, which has pegged growth of two per cent this year and 2.5 per cent in 2017.

The IMF did not provide an analysis of its Canadian projections.

The Bank of Canada will release its assessment of the economy on Wednesday, at the same time as governor Stephen Poloz announces his latest decision on the bank’s trendsetting interest rate — currently at 0.5 per cent, after being cut twice last year in an effort to buffer the impact of drastically lower oil prices.

Last year, the Canadian economy contracted in the first and second quarters — the technical definition of a recession — as the plunge in energy prices hit resources-reliant provinces, such as Alberta and Newfoundland and Labrador, the hardest.

The country’s new Liberal government has pledged to invest strongly in infrastructure projects to help jumpstart the economy. Ottawa expects federal spending will result in deficits of about $10 billion over the next three years before returning to a balanced budget in the fourth year, although many analysts anticipate the shortfalls could be much deeper than planned if the economy continues to struggle.

The IMF update focused largely on the United States and China — the world’s two biggest economies — which are forecast to grow this year by 2.6 per cent and 6.3 per cent, respectively. While the U. S. advance was slightly better than the 2.5 per cent posted last year, the IMF sees the economy of China — still referred to as an emerging market, and not a G7 member — slowing from the estimated 6.9 per cent growth it saw last year.

The agency said there is a “gradual slowdown and rebalancing of economic activity in China away from investment and manufacturing toward consumption and services, ( along with) lower prices for energy and other commodities, and a gradual tightening in monetary policy in the United States in the context of a resilient U. S. recovery — as several other major advanced- economy central banks continue to ease monetary policy.”

Meanwhile, the IMF forecasts global growth will strengthen to 3.4 per cent this year, following an estimated advance of 3.1 per cent in 2015, with next year expected to see stronger output of 3.6 per cent.