IMF downgrades Canadian growth outlook to 1% for 2015
The IMF has downgraded its outlook for Canadian growth to one per cent this year because of the impact of lower oil and commodities prices.
It also has revised its expectations for global growth downwards to 3.1 per cent, the lowest since 2009.
In a report Tuesday in advance of the IMF-World Bank annual meetings this week in Lima, Peru, it highlights the downside risks to the world economy from the economic slowdown in China and low prices for commodities.
The recovery it expected earlier in the year has become uneven, it said in its World Economic Outlook with marginal advances in developed economies and slowing in most emerging economies.
"Six years after the world economy emerged from its broadest and deepest postwar recession, the holy grail of robust and synchronized global expansion remains elusive," said Maurice Obstfeld, IMF director of research.
Growth slower in most nations
"Despite considerable differences in country-specific outlooks, the new forecasts mark down expected near-term growth marginally but nearly across the board."
It has revised its estimate for Canadian GDP growth downward by half a percentage point from its July forecast to one per cent this year, and to 1.7 per cent in 2016. Last year, the IMF was forecasting 2.2 per cent growth for the Canadian economy.
A side report explores how the sharp decline in commodity prices over the last three years has hurt economies dependent on commodities, including Canada, Chile and Australia.
"The weak commodity price outlook is estimated to subtract almost one percentage point annually from the average rate of economic growth in commodity exporters over 2015–17 as compared with 2012–14," the IMF said.
"In exporters of energy commodities, the drag is estimated to be larger: about 2¼ percentage points on average over the same period."
Canada and low commodities prices
Canada saw a weakening of its manufacturing sector as capital and labour moved toward oil and gas and mining sectors during the boom years, the study found.
It suggests the impact of this commodities bust could be greater than in the past because of the large increase in output of metals and oil during the early 2000s.
The U.S., with a more robust manufacturing base, is expected to grow 2.6 per cent this year and 2.8 per cent next year.
The IMF expects Chinese economic growth to drop to a 25-year low of 6.8 per cent this year.
China's transition from an investment-driven exporter to a market-based and consumption-driven growth is one of the key risk factors for the world economy in the near term, the IMF.
It also points to risk from:
- Low oil and other commodity prices.
- Financial market volatility.
- The appreciation of the U.S. dollar.
- Geopolitical tensions in Ukraine, the Middle East, or parts of Africa.
Obstfeld urged the U.S. to hold off on interest rate hikes, which could accelerate the rise of the U.S. dollar and leave emerging markets with unsustainable U.S. dollar debt.
