/IMF cuts growth outlook for Canada amid trade tensions

IMF cuts growth outlook for Canada amid trade tensions

Canada’s growth prospects appear bleaker than they did at the start of 2019, according to a new report by the International Monetary Fund.

The IMF cut its growth estimate for Canada to 1.5 per cent in 2019, down from its previous estimate of 1.9 per cent growth in January, according to its World Economic Outlook report published Tuesday.

Canada is not alone in the expected slowdown. In fact, the IMF cut its overall global growth forecast to 3.3 per cent for 2019, down from its prediction of 3.5 per cent in January and a dip from global growth of 3.6 per cent in 2018. Global growth peaked at about 4 per cent in 2017.

The organization blamed the rockier outlook on U.S.-China trade tensions, problems in Germany’s auto sector, uncertainty around Brexit and financial vulnerabilities in advanced economies.

 

While there’s increasing hope that trade issues could be resolved, the IMF said the “risks are tilted to the downside.”

“A further escalation of trade tensions and the associated increases in policy uncertainty could further weaken growth,” the report stated. “The potential remains for sharp deterioration in market sentiment.”

However, Canada is poised to benefit from the trade dispute between the world’s two most powerful economies.

“Trade diversion leads to substitution of China’s exports to the United States: Mexico and Canada benefit most, reflecting their close proximity to, and strong trade relations with, the United States,” the IMF said.

Still, the organization expects global growth will return to 3.6 per cent in 2020. Growth in Canada is expected to pick up to 1.9 per cent by then.

Trade tensions and the oil price rollercoaster have particular effects on Canada, which has yet to ratify the renegotiated NAFTA agreement.

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