IMF says global economy is 'fragile'

International Monetary Fund notes that Canada is one of only a few countries planning to raise its public investment ratio this year


TORONTO — The International Monetary Fund says the global economy remains fragile and requires fiscal policies that boost growth.

It says governments with room to manoeuvre should invest in public infrastructure while having a clear plan to keep debt at sustainable levels.

The IMF says Canada was one of only a few countries planning to raise its public investment ratio this year, as outlined in the federal budget released on March 22.

The Trudeau government’s first budget projects a $29.4-billion shortfall in the current 2016-17 financial year, the first of five consecutive annual deficits that will total more than $110 billion.

Some of the budget’s critics have said it doesn’t contain a clear plan for balancing the books within four years _ a Liberal campaign promise.

The IMF released its annual fiscal monitor today at its spring meetings in Washington, shortly after the Bank of Canada upgraded its economic projection for this year, citing the positive effect of the federal government’s spending plan.

The Bank of Canada’s new estimate for 2016 economic growth is 1.7 per cent, up from its previous estimate of 1.4 per cent That contrasted with the IMF’s decision this week to lower its growth estimate for Canada to 1.5 per cent from 1.7 per cent.

The IMF is also less optimistic about Canada’s real GDP growth in 2017, which it estimates at 1.9 per cent compared with the Bank of Canada’s estimate of 2.3 per cent.

The Finance Department has estimated that the budget’s measures — including infrastructure investments and tax relief for middle- and low-income households — will add 0.5 per cent to this year’s economic growth and one per cent in 2017-18.

The budget uses a private-sector estimate of 1.4 per cent growth in GDP in 2016 and 2.2 per cent in 2017.

On Tuesday, the IMF lowered its economic growth projections for Canada and the world, citing slowing growth in global oil exports, low crude prices and weak demand for non-oil commodities. In January, the IMF estimated Canadian growth at 1.7 per cent in 2016 and 2.1 per cent in 2017.