IMF predicts growth for Canada, but at slower pace

‘Breakout year’ in 2017 won’t be repeated, but outlook is good

The International Monetary Fund projects moderate economic growth for Canada this year and next, albeit at a rate lower than last year’s and significantly slower than in the United States.

In a document generally positive about the current global economy, but flashing warning signs of potential trouble ahead, Tuesday’s IMF World Economic Outlook foresees growth in Canada of 2.1 per cent this year and 2 per cent next year.

That represents a downgrade from January’s outlook of 2.3 per cent growth forecast for this year, and it’s less than the strong 3 per cent growth Canada experienced in 2017.

It’s less optimistic than the forecast for the U.S., which is projected to grow almost 3 per cent — a significant improvement from recent outlooks.

“They’re very closely aligned with our forecasts,” said Brett House, the deputy chief economist at Scotiabank, where the prediction for Canada is onetenth of a percentage point higher than the IMF’s. “Very, very close to our numbers.”

The broader document is generally optimistic about this year’s global prospects, with worldwide growth being on an upswing and a larger-than-previous forecast of a 3.9 per cent increase for 2018.

Yet it warns of looming worries — potential trade wars; rising interest rates; heavy spending in certain countries, including the U.S., which could leave little fiscal space for the next downturn; and insufficient worker skills to deal with technological changes.

“Favourable conditions will not last forever,” IMF economic counsellor Maurice Obstfeld wrote. “Now is the moment to get ready for leaner times.”

House calls the slightly slower growth in Canada unsurprising, describing 2017 as a “breakout year,” with growth boosted by the new federal child-care benefit and the oil rebound.

“Things continue at strong levels in 2018,” he said. “But when you’re already at a strong level, growing at the same nearly 3-per-cent rate that we saw last year is tough.”