IMF sees Canada as top G7 economy; warns against complacency
WASHINGTON - The current broad-based global economic upswing will likely be sustained this year and next, the International Monetary Fund said on Tuesday, with Canada poised to outpace its G7 peers amid sluggish outcomes in the United States and Britain.
The IMF upgraded its global economic growth forecast for 2017 by 0.1 percentage point to 3.6 per cent, and to 3.7 per cent for 2018, driven by a pickup in trade, investment, and consumer confidence.
Canada’s economy is now seen growing 3.0 per this year, half a percentage point above the IMF’s previous forecast. Forecasts for euro zone, Japan, China, emerging market Europe and Russia were all revised upwards.
The growth outlook in the United States was unchanged from the Fund's July report at 2.2 per cent for this year and 2.3 per cent in 2018, as expected tax cuts under President Trump's administration have not yet materialized.
"Given the significant policy uncertainty, IMF staff’s macroeconomic forecast now uses a baseline assumption of unchanged policies, whereas the April 2017 WEO (World Economic Outlook) built in a fiscal stimulus from anticipated tax cuts," the Fund said in its revisions to its U.S. economic forecasts.
What’s the biggest risk to Canada’s economy?
The U.S. Republican party has presented three tax proposals since Trump took office in January and the latest effort by the Trump administration is already mired in political disagreements in Congress.
The Fund said that over the longer term, U.S. economic growth would moderate due to sluggish productivity growth and changing demographics. It said the economy's potential growth rate was just 1.8 per cent, far lower than the 3.0 per cent or more being targeted by Trump and his administration.
Economic growth in the euro zone was revised upwards from the July forecast by 0.2 percentage points for both 2017 and 2018 to 2.1 per cent and 1.9 per cent respectively, reflecting an export revival, stronger domestic demand due to accommodative financial conditions and a lowering of political risk.
The report pre-dated unrest in the Catalonia region of Spain.
The Fund cautioned that euro zone growth would remain under pressure due to weak productivity, an ageing population and, in some countries, high debt.
Economic growth in Britain for 2017 had already been revised sharply lower by the Fund to 1.7 per cent in the wake of the country's vote to leave the European Union and so-far inconclusive talks on Brexit.
The Fund had already cut its 2017 forecast by 0.3 percentage points in July from April and left its latest forecast unchanged.
Since its 2016 Brexit vote, Britain has gone from being one of the fastest growing economies in the Group of Seven rich nations to one of the slowest, with only Japan and Italy forecast to grow more slowly than the 1.5 per cent forecast for Britain in 2018.
The Fund upgraded its growth rates for China all the way through 2022, on the assumption that authorities in Beijing will maintain expansionary policies. The Fund forecast 6.8 per cent growth for this year and 6.5 per cent for next, both upward revisions of 0.1 percentage points from July.
Looking forward, the Fund warned that potential major disruptions to its global outlook could come from "difficult-to-predict" U.S. regulatory, trade and fiscal policies, and from disruptions relating to Britain's exit from the European Union, as well from central banks raising interest rates too quickly.
“Financial conditions remain buoyant across the world, and financial markets seem to be expecting little turbulence going forward, even as the Federal Reserve continues its monetary normalization process and the European Central Bank inches up to its own,” the IMF wrote in its report.
“These positive developments give good cause for greater confidence, but neither policymakers nor markets should be lulled into complacency.”
-- With files from BNN