Canada

Tuesday, April 9, 2019 - 09:00

MNI POLICY: IMF Slashes Canada's 2019 Growth Estimate to 1.5%


By Yali N'Diaye

OTTAWA (MNI) - The International Monetary Fund slashed Canada's real growth projection to 1.5% for 2019 in its April World Economic Outlook update. It had previously forecast 1.9% growth for both 2019 and 2020, but lowered the 2019 estimate before an expected rebound to 1.9% next year.

The 0.4-percentage point downward revision brought IMF's view closer to the Bank of Canada's 1.7% growth estimate. However, the central bank will likely revise down its 2019 projection after 4Q 2018 GDP came in at an annualized rate of 0.4%, less than half the 1.3% expected by the central bank, which expected a 0.8% rebound in the first quarter of this year in its January economic update. The BOC will publish its next Monetary Policy Report on April 24.

The IMF said the global economy was at a "delicate moment" and cut its world output projection to 3.3% from 3.5% for 2019, with a downward adjustment to 2.3% for Canada's main trading partner, the United States.

The slowing global growth momentum is adding pressure on the BOC to back up its growth rotation scenario counting on exports and business investment to become the engines of growth as consumer spending and housing are losing steam.

Canada is subject to the same global uncertainty stemming from trade tensions. In particular, the US-Mexico-Canada Agreement remains subject to domestic negotiations as it has yet to be ratified by the three countries.

And despite an upturn in oil prices since the beginning of the year, the IMF outlook for commodity prices is "generally subdued", as the WEO assumes oil prices will remain below their 2018 average this year.

"Although risks are balanced, substantial uncertainty around the baseline oil price projections remains because of high policy uncertainty," the IMF warned.

--MNI Ottawa Bureau; +1 613 869-0916; email: yali.ndiaye@marketnews.com

[TOPICS: M$C$$$,MI$$$$]

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