Saturday, April 16, 2016

IMF lowers growth prediction for Canadian GDP in 2016 and 2017

Although the Canadian economy had a fast start this year the International Monetary Fund(IMF) has reduced its growth forecast. The IMF cited continuing damage to the energy sector and lower expected growth globally as reasons for the reduced prospects.

The IMF cut its projection for Canadian gross domestic product (GDP) growth to 1.5 percent in 2016. In the previous prediction last quarter in January, the outlook was for 1.7 percent. The outlook for 2017 was reduced from 2.1 percent to 1.9 percent. The IMF said commodity-exporting economies suffered from reduced income and reduced investment. In Canada, the energy sector was a drag, only partially offset by a lower loonie and an expected increase in public investment by the Liberal government.
This is the sixth straight quarter that the IMF has reduced part of its two-year Canadian GDP outlook. The decline in our growth outlook has reflected the slump in prices for commodities. The Bank of Canada also predicted lower growth in Canada in a January report at 1.4 percent. Private-sector economists have a rosier projection of our growth at least during the first quarter this year. They think that our growth was close to 3 percent on an annualized basis and expect our growth to be close to 2 percent for the year. The Bank of Canada's projection for the year in January was 2.4 percent well above that of the IMF.
The CIBC's most recent forecast for 2016 was at 3.2 percent, down from 3.4 percent in January and 3.8 percent a year ago. For 2017 it forecast growth at 3.5 percent down marginally from its January forecast of 3.6 percent.
The Organization for Economic Co-operation and Develoment (OECD) also downgraded its estimates for the growth in the Canadian Economy as well as those for other G7 countries. The OECD predicted that Canada's economy will grow by 1.4 percent this year and 2.2 percent in 2017.
The global outlook also was for weaker growth according to the IMF report:“Global recovery continues, but at an ever-slowing and increasingly fragile pace. The months since the last World Economic Outlook have seen a renewed episode of global asset market volatility, some loss of growth momentum in the advanced economies, and continuing headwinds for emerging market economies and lower-income countries...Consecutive downgrades of future economic prospects carry the risk of a world economy that reaches stalling speed and falls into widespread secular stagnation.”The report did note, however, that conditions had improved somewhat since earlier in the year. Oil prices were somewhat firmer, and capital outflows from China were lower, and some decisions by central banks were helping to improve sentiment about economic growth but downside risks remained. The IMF World Econonomic Outlook is released just prior to the spring meetings of the IMF and World Bank to take place in Washington April 15 to 17.

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