IMF raises outlook for Canadian economy

The lending agency projects economy will grow 2.3 percent this year, up from an estimate of 2.1 percent in October

January 22, 2018
The Canadian Press
The Canadian Press

WASHINGTON—The International Monetary Fund raised its estimate for economic growth in Canada this year as it said US tax cuts are expected to help boost global economic growth.

The international lending agency said it now projects Canada’s economy will grow 2.3 percent this year, up from an estimate of 2.1 percent in October.

Growth for 2019 is forecast at 2.0 percent, up from an earlier projection for 1.7 percent.

The update for Canada came as the IMF said world output is expected to grow 3.9 percent this year and 3.9 percent in 2019, up two-tenths of a percentage point in both years.

The IMF said the cyclical upswing underway since mid-2016 has continued to strengthen.

“This forecast reflects the expectation that favourable global financial conditions and strong sentiment will help maintain the recent acceleration in demand, especially in investment, with a noticeable impact on growth in economies with large exports,” the agency said in its report.

“In addition, the US tax reform and associated fiscal stimulus are expected to temporarily raise US growth, with favourable demand spillovers for US trading partners—especially Canada and Mexico—during this period.”

The IMF cited increased investment as businesses take advantage of lower corporate tax rates as it projected US growth to increase to 2.7 percent this year, from 2.3 percent in 2017.

The agency noted that risks to its global outlook were “broadly balanced” in the near term, but skewed to the downside in the medium term.

“In the near term, the global economy is likely to maintain its momentum absent a correction in financial markets—which have seen a sustained run-up in asset prices and very low volatility, seemingly unperturbed by policy or political uncertainty in recent months,” the report said.

“Over the medium term, a potential buildup of vulnerabilities if financial conditions remain easy, the possible adoption of inward-looking policies, and non-economic factors pose notable downside risks.”