OTTAWA – The International Monetary Fund is upgrading Canada’s growth expectations for this year to 1.7 per cent, but warns overall global conditions remain uneven, weak and perilous.
The two-tenths of a percentage point upward revision for Canada follows a first quarter that topped expectations by coming in a relatively strong 2.5 per cent.
But the IMF believes it will all come out in the wash. It predicts Canada’s growth rate will rise to only 2.2 per cent next year, two-tenths less than its previous forecast issued in April.
The latest report from the Washington-based organization gives little encouragement to those who have long been calling for the recovery from the crippling 2008-09 great recession to take root.
Instead, the IMF says the world economy is still in first gear and will take at least another year to come out of the slow lane.
It expects growth around the world will barely top three per cent this year, moderately lower than previously thought, and only start showing signs of life at 3.8 per cent in 2014. With emerging economies running at five, six and seven per cent rates, a 3.1 per cent advance is not considered strong for global activity.
The IMF says downside risks still dominate, with some new ones coming on stream, including a longer growth slowdown in emerging countries such as China and India, tighter financial conditions, and a more protracted recession recovery in Europe.
Given the soft conditions, the IMF says stronger growth will require additional policy action from governments, particularly from advanced economies.
The IMF notes that government contraction in the United States has weighed on growth in that key economy, while Japan expanded better than expected in part due to accommodative policies that weakened the yen and strengthened net exports.
The organization’s forecast for Canada in 2013 is aligned with many private and official projections, but the 2.2 per cent prediction for 2014 is well below the Bank of Canada’s 2.8 per cent figure.