The International Monetary Fund has downgraded its 2017 forecast for Canada citing the ongoing challenges from China’s slowing growth, plunging oil prices and a rising U.S. dollar.
According to the IMF’s World Economic Outlook update, Canada will grow just 1.7 per cent in 2016 and 2.1 per cent in 2017. Like other oil exporting nations, Canada is feeling the pain of a 70-per-cent plunge in the world price of crude oil from $100 a barrel just 20 months ago.
The IMF downgraded its forecast for by 0.2 percentage points to 3.4 per cent in 2016 and 3.6 per cent in 2017, citing a global slowdown across both the advanced and emerging economies. The latest downgrade is due to a deeper than expected recession in Brazil, the impact of low oil prices on leading Middle East producer Saudi Arabia, and slower than expected U.S. growth, the IMF said.
For Canada, the 2016 forecast is unchanged, but the outlook for 2017 is down 0.3 percentage points since the IMF’s last prediction, in October. The IMF’s worsening outlook comes ahead of the Bank of Canada’s rate-setting decision.
The Canadian dollar, closely tied to oil’s performance, recently slipped to a 13-year low.
Markets around the globe have been affected by uncertainty surrounding China’s slowing growth rate.
Private sector economists urge Canada’s federal government to pull forward some of its planned investments in social housing, transit and other major projects in its first budget, expected in late March.
The improvement in 2016 is predicated on the most economically distressed economies of Brazil, Russia and some Middle Eastern nations.
The world’s emerging economies, which account for half of all global activity and 70 per cent of global growth, will see their growth rate shrink for the fifth year in a row, the IMF predicted.
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