IMF Lowers Canada’s Growth Rate Predictions

In the opening speech of the meeting arranged by International Monetary Fund on Tuesday in Tokyo, it basically reduced its global economic outlook. It also specifically warned about the Canadian economy still being weak and open to high household debt levels and added risks of the housing sector.

In the latest World Economic Outlook report, the IMF reduced its growth forecast of the world economy to 3.3 per cent this year. Its initial estimate of 3.5 per cent was issued in July. The Chief Economist of IMF, Olivier Blanchard, stated that “low growth and uncertainty in advanced economies are affecting emerging market and developing economies through both trade and financial channels, adding to homegrown weaknesses.”

The growth rate of Canada was initially predicted to be 1.9 per cent for this year and 2 per cent for the coming year, now both predictions are lowered by 0.2 per cent. The report specified that Canada’s economic recovery has been “more robust” than in the United States, which is a result of “favorable financing conditions,” along with the commodity boom in the country. It was also cautioned that “in Canada, a priority is to limit risks related to elevated house prices and household debt levels.”

The report mentioned that “activity has recovered at a faster pace than in the United States. Domestic demand — both business investment and private consumption — has been supported by exceptionally favorable financing conditions, including low interest rates and credit availability.”

At the end, the report also notified that “it is very difficult to estimate the probability that this action will materialize.”

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