The International Monetary Fund (IMF) has lowered its projection of Canada’s economic growth for 2014, the organization announced July 24.
The Canadian economy will grow by 2.2% this year, the IMF forecasts, which is a downgrade from the 2.1% projected in April.
The growth forecast for 2015 remains at 2.4%.
These decreased projections are similar to the downgrade announced by the Bank of Canada July 16. Canada’s central bank decreased its projections for the country’s growth in real gross domestic product to an average of 2.25% from 2014 to 2016, with the economy expected to reach full capacity in mid-2016.
Lowered expectations for Canada were driven by a weaker global outlook, said the bank.
“However, the bank still expects that the lower Canadian dollar and a projected strengthening in global demand will lead to a pickup in Canadian exports and business investment and, eventually, a more sustainable growth track,” the bank said in a release. “Meanwhile, household imbalances continue to evolve constructively and recent data are broadly consistent with a soft landing in Canada’s housing market.”
The IMF also downgraded its global growth forecast. The projection for 2014 has been lowered by 0.3% to 3.4%. This was due in large part to a weak first quarter in the United States, which was negatively affected by a bigger-than-expected inventory overhang at the end of 2013.
“[In the U.S.] a harsh winter further dampened demand, exports declined sharply after a strong fourth quarter and output contracted in the first quarter of 2014,” the IMF said in its World Economic Outlook (WEO) released July 24.
Decreased expectations in a number of emerging markets are also behind the downgraded forecast.
Some rebound is expected over the remainder of the year, but it is not forecast to offset Q1’s poor showing.
The IMF said worldwide downside risks remain a concern.
“Increased geopolitical risks could lead to sharply higher oil prices,” the IMF said.
“Financial market risks include higher-than-expected U.S. long-term rates and a reversal of recent risk spread and volatility compression.”
Growth for 2015 is still expected to be 4%.
