IMF Expects Canadian Growth to Increase

This article was last updated on April 16, 2022

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The International Monetary Fund mentioned in a statement issued on Wednesday that it anticipates Canadian economy to boost up next year in light of increasing demand from the U.S. that is expected to consequently improve exports and investment. The IMF predicts that Canadian growth will reach almost 2.25 per cent next year, after a relatively meek growth rate of 1.6 per cent this year since exports and business investment were “disappointed.”

It was highlighted that increased activity next year will take advantage of robust external demand, though the risk of to its outlook will still preside with the U.S. economy fares. Additionally, IMF underlined heightened household debt levels and high valuations in the housing market as concerns, taking notice of Canada’s debt-to-income ratio that has reached a new record in the middle of this year. The statement mentioned that “elevated levels of household debt and high valuations in a number of housing markets remain a potential vulnerability.”

The IMF predicts overvaluation in Canada’s housing market, between 5 per cent and 10 per cent, which will be a decrease from its views last year. It does not anticipate a bubble bursting in the housing market, but instead hopes it to be a relatively gradual stabilization. IMF expressed little need to imminently increase borrowing costs, as it expects interest rates to increase from early 2015 onwards, i.e. also predicted by numerous economists. Its view is that “policy makers can afford to wait before starting to raise policy rates towards more normal levels.”