IMF predicts ‘ solid’ Canadian growth
OTTAWA — The “uneven” global recovery will be with us for at least another year or two, although the pace of growth will be “more country specific” than before, according to the world’s biggest lending agency.
Overall growth should reach 3.3 per cent this year and 3.8 per cent next year, the International Monetary Fund said in its October outlook released Tuesday. That’s down 0.1 per cent and 0.2 per cent, respectively, from the agency’s forecast in July.
For Canada, the IMF said “growth is expected to be solid,” thanks mainly to a strong pickup that is likely to continue in the United States during 2014 and into 2015. But it continued to caution policymakers about Canada’s “still-overvalued” housing market.
The domestic economy is forecast to rise 2.4 per cent in 2014 and 2.4 per cent in 2015, representing a 0.1 per cent increase in both years, the Washington- based IMF said. That’s an improvement over Canada’s two per cent rate of expansion in 2013 and 1.7 per cent a year earlier.
The IMF said house prices are increasing at a strong pace in many advanced economies, including Canada where “high household debt and a still-overvalued housing market remain important domestic vulnerabilities.”
The agency again suggested that Canada “may require additional macro- prudential measures,” something Finance Minister Joe Oliver says is unnecessary at the moment, given Ottawa’s gradual tightening of mortgage- lending rules over the past five years.
Oliver also maintains there are no signs of a housing bubble in Canada.
Nevertheless, helping to feed high housing prices is the fact that “monetary policy conditions have remained very accommodative” in Canada and the other advanced countries.
The Bank of Canada’s trendsetting rate, for example, has been at one per cent for more than four years, while the U. S. Federal Reserve’s lending level has been near zero since the end of the recession — with the added stimulus of quantitative easing, a move also adopted by the Bank of England.
The October world outlook comes ahead of meetings this week of the IMF and World Bank in Washington, where Oliver and central bank governor Stephen Poloz will attend the G20 finance leaders summit on Friday and Saturday.
In its global outlook, the IMF said it expects the U. S. — the world’s largest economy and Canada’s main export destination — to post consecutive gains of 2.2 per cent and 3.1 per cent over the next two- year period, up 0.5 per cent from the July reading for 2014 but unchanged for 2015.
“Growth rebounded in the second quarter of this year, and labour market conditions continued to improve, with robust employment growth,” it said.
“Despite the slowdown, U. S. imports were stronger than expected during the first half of the year, suggesting that spillovers from weaker U. S. activity through trade channels were limited.”
Less fortunate will be some members of the eurozone — such as Italy, which has contracted, a close- to- flat- lining France and Germany, Europe’s biggest economy, slipping surprisingly into reverse in the second quarter of 2014.