The International Monetary Fund (IMF) is lowering its economic forecast for Canada and the world, the Washington D.C.-based organization announced on Tuesday.
The IMF is now calling for global gross domestic product (GDP) growth of 3.2% in 2016, which represents a 0.2 downward revision compared to its January forecast. “The global recovery has weakened further amid increasing financial turbulence,” the IMF notes in its latest economic outlook report.
The report cites weaker economic activity, concerns about the trajectory for China’s economy, and weak oil prices as factors feeding that turbulence. “In addition, several stresses of noneconomic origin threaten economic activity,” the report says.
The IMF has also lowered its expectations for Canada, where it now predicts growth will reach just 1.5% for 2016, before accelerating a bit to 1.9% in 2017. Both of these calls are 0.2 percentage points lower than the IMF’s January call.
For 2016 in Canada, “the drag from the energy sector [will be] offset partially by a more competitive currency and an expected increase in public investment,” the IMF report says.
The global economic recovery is projected to strengthen in 2017 and beyond, the IMF report says, “driven primarily by emerging market and developing economies.” However, it also acknowledges that uncertainty has increased, and that the risks of weaker growth is “becoming more tangible.”
Given the continued economic uncertainty, the IMF sees increased need for “a broad-based policy response to raise growth and manage vulnerabilities.” In advanced economies, the IMF’s policy prescription includes structural reforms, loose monetary policy, and growth-friendly fiscal policies.
In emerging markets, the IMF report recommends that policymakers should aim to implement reforms to enhance productivity, in an effort to reduce their macroeconomic and financial vulnerabilities and
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