The Canadian Press - ONLINE EDITION

IMF says weakness more persistent, cuts growth outlook globally and in Canada

  • Print

OTTAWA - The International Monetary Fund says Canada's economy will be a little weaker this year than previously projected, although it will continue to lead all nations in the Group of Seven but one.

The downgrade of Canadian and global growth in the latest outlook was expected given the sharp slowdown in the U.S. and China — the world's two largest economies — during the first quarter of the year.

But the report Thursday contained a few surprises, including that the United Kingdom will emerge as the growth leader among the G7 countries for the next two years — and that although forward momentum has resumed, weakness will likely be felt for a while longer.

"Key drivers supporting the recovery identified in the April 2014 (outlook) remain in place, including moderating fiscal consolidation and highly accommodative monetary policy in most advanced economies," the Washington-based financial institution says.

"Nevertheless, some of the demand weakness in the first quarter appears to be more persistent, especially in investment globally, and is expected to result in lower global growth in 2014."

The verdict is similar to the one delivered last week by the Bank of Canada, which also shaved global growth and subsequently Canada's on the assumption that weaker demand for Canadian exports would continue to dampen activity domestically.

"Our serial disappointment with global economic performance for the past several years means that we remain pre-occupied with downside risks," is the way bank governor Stephen Poloz put it.

Both the IMF and the Canadian central bank see the Canadian economy growing at just over two per cent in the next two years — 2.2 in 2014 and 2.4 in 2015.

Both are also on the same page as to what will happen in the U.S. The IMF's forecast is for 1.7 and 3.0 per cent growth in 2014 and 2015 respectively.

As for the global economy, the IMF says the first quarter stall in the two largest economies means a three-tenths of a point downgrade to 3.4 per cent in 2014, picking up to four per cent in 2015. The Bank of Canada sees global activity as even softer at 2.9 per cent growth this year and 3.6 next.

As it has previously, the IMF underscored that although the recovery is proceeding — if disappointingly slow — downside risks prevail, including trouble spots such as in the Ukraine and the Middle East that could lead to a spike in oil prices.

"Global growth could be weaker for longer," it said, "given the lack of robust momentum in advanced economies... In some major emerging market economies, the negative growth effects of supply-side constraints and the tightening financial conditions over the past year could be more protracted."

In a paper for the C.D. Howe Institute this week, McMaster University economics professor William Scarth recommended Ottawa return to stimulus spending to boost job creation, which has largely stalled over the past 18 months or so.

Most analysts, including the bank governor, believe the Canadian economy won't return to robust growth, and job creation, until the rest of the world does.

That's because with Canadian households at near-record high levels of debt, they won't be able to continue to sustain the economy through spending on homes, cars and other items.

On that front, there was some good news Thursday from China.

Beijing reported factory sentiments rose markedly in July as the country's manufacturing index rose to 52, the highest level in 18 months. A strong Chinese economy benefits Canada because it increases demand and prices for natural resources that Canada has in abundance.

Fact Check

Fact Check

Have you found an error, or know of something we’ve missed in one of our stories?
Please use the form below and let us know.

* Required
  • Please post the headline of the story or the title of the video with the error.

  • Please post exactly what was wrong with the story.

  • Please indicate your source for the correct information.

  • Yes

    No

  • This will only be used to contact you if we have a question about your submission, it will not be used to identify you or be published.

  • Cancel

Having problems with the form?

Contact Us Directly
  • Print

You can comment on most stories on winnipegfreepress.com. You can also agree or disagree with other comments. All you need to do is be a Winnipeg Free Press print or e-edition subscriber to join the conversation and give your feedback.

You can comment on most stories on winnipegfreepress.com. You can also agree or disagree with other comments. All you need to do is be a Winnipeg Free Press print or e-edition subscriber to join the conversation and give your feedback.

Have Your Say

New to commenting? Check out our Frequently Asked Questions.

Have Your Say

Comments are open to Winnipeg Free Press print or e-edition subscribers only. why?

Have Your Say

Comments are open to Winnipeg Free Press Subscribers only. why?

The Winnipeg Free Press does not necessarily endorse any of the views posted. By submitting your comment, you agree to our Terms and Conditions. These terms were revised effective April 16, 2010.

letters

Make text: Larger | Smaller

LATEST VIDEO

Winnipeg Jets Bogosian-Little-Ladd

View more like this

Photo Store Gallery

  • Aerial view of Portage and Main, The Esplanade Riel, Provencher Bridge over the Red River, The Canadian Museum for Human Rights and The Forks near the Assiniboine River, October 21st, 2011. (TREVOR HAGAN/WINNIPEG FREE PRESS) CMHR
  • Winnipeg’s best friend the dragon fly takes a break at English Gardens in Assiniboine Park Wednesday- A dragon fly can eat  food equal to its own weight in 30 minutes-Standup photo- June 13, 2012   (JOE BRYKSA / WINNIPEG FREE PRESS)

View More Gallery Photos

Poll

Do you think volunteers dragging the Red River is a good idea?

View Results

Ads by Google