IMF Executive Board Concludes 2024 Article IV Consultation with Canada
IMF News, July 16, 2024
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- Published: July 16, 2024
Macroeconomic outlook and baseline projections
- The Canadian economy appears to have achieved a soft landing: inflation has come down almost to target, while a recession has been avoided, with GDP growth cushioned by surging immigration even as per capita income has shrunk.
- Real GDP growth is expected to pick up slightly in 2024, supported by:
- recently initiated normalization of monetary policy,
- some easing of fiscal policy,
- continued (even if slowing) immigration,
- expansion of the Trans Mountain pipeline.
- Inflation is set to continue declining, reaching the 2-percent target by early 2025.
- Risks around the baseline forecast are broadly balanced:
- Downside risks: an abrupt global slowdown could dampen Canadian growth and inflation; tighter financial conditions could negatively affect the outlook.
- Upside risks: labor market resilience and stronger-than-anticipated US demand could lead to a stronger growth outlook.
Executive Board assessment and policy recommendations
- Directors commended the authorities for a strong track record of sound policies and agreed that the Canadian economy appears to have achieved a soft landing, with inflation declining to near target levels.
- Monetary policy:
- Directors welcomed the Bank of Canada’s (BoC) decision to begin lowering policy rates in June.
- Further rate cuts should be carefully calibrated and data dependent; the monetary policy stance should remain restrictive for a while.
- Directors noted improvements in BoC communication and supported additional enhancements.
- Fiscal policy:
- Directors commended prudent fiscal policy in international comparison; Canada enjoys a AAA rating.
- A somewhat tighter stance this year would support efforts to reduce inflation and rebuild buffers.
- Directors welcomed the introduction of quantitative fiscal objectives; most suggested adoption of a formal fiscal framework to better anchor policy.
- Continued coordination between fiscal and monetary policy remains imperative.
- Financial sector and supervision:
- The financial system is resilient, with banks well capitalized and liquid.
- Data gaps preclude a more definitive assessment of nonbank financial institutions; Directors emphasized the need for continued vigilance and addressing data gaps for nonbanks, including through enhanced federal‑provincial supervisory cooperation.
- Directors supported continued efforts to strengthen the AML/CFT framework and encouraged implementation of the 2019 FSAP recommendations; they looked forward to the 2025 FSAP.
- Structural policies to boost productivity and living standards:
- Key priorities: harness advanced technologies; reduce interprovincial barriers to trade; fully integrate immigrants into the labor market; increase female labor force participation (for instance, via the authorities’ affordable childcare program).
- Directors supported authorities’ actions to boost housing supply, noting housing affordability has reached its worst levels in a generation and further efforts at all levels of government are needed to close the sizeable housing gap.
- Climate policy:
- Directors stressed that carbon pricing is the most cost‑effective way to achieve Canada’s ambitious climate goals.
- They acknowledged green industrial policies could play a role but urged care to avoid trade distortions and to maintain a level playing field for all companies.
Selected economic indicators and key statistics
- Nominal GDP (2022): Can$ 2,785 billion (US$ 2,139 billion)
- Quota: SDR 11,023.9 million
- GDP per capita (2022): US$ 54,015
- Population (2022): 39.6 million
- Main exports: Oil and gas, autos and auto parts, gold, lumber, copper.
- Output and Demand (percent change, unless otherwise indicated)
- Real GDP:
- 2020: -5.0
- 2021: 5.3
- 2022: 3.8
- 2023: 1.2
- 2024: 1.3
- 2025: 2.4
- 2026: 2.0
- 2027: 1.8
- 2028: 1.6
- 2029: (value not provided)
- Total domestic demand:
- 2020: -6.1
- 2021: 6.5
- 2022: 5.1
- 2023: -0.3
- 2024: 1.4
- 2025: 2.9
- 2026: 2.3
- 2027: 2.1
- 2028: 1.9
- Private consumption:
- 2020: -6.3
- 2021: 1.7
- 2022: 2.8
- 2023: 3.6
- 2024: 2.7
- 2025: 2.6
- Total investment:
- 2020: -7.0
- 2021: 14.3
- 2022: 7.1
- 2023: -6.0
- 2024: -0.9
- 2025: 3.0
- Net exports, contribution to growth:
- 2020: 0.3
- 2021: -1.8
- 2022: -1.4
- 2023: 1.5
- 2024: -0.2
- 2025: -0.5
- Output gap 1/ (Percent of potential GDP):
- 2020: -3.4
- 2021: 0.8
- 2022: 0.0
- 2023: -0.6
- 2024: -0.1
- 2025: 0.1
- Unemployment and Inflation
- Unemployment rate (average) 2/ (Percent):
- 2020: 9.7
- 2021: 7.5
- 2022: 5.4
- 2023: 6.2
- 2024: 6.3
- 2025: 6.0
- CPI inflation (average):
- 2020: 0.7
- 2021: 3.4
- 2022: 6.8
- 2023: 3.9
- 2024: 2.5
- Saving and Investment 3/ (Percent of GDP)
- Gross national saving:
- 2020: 20.7
- 2021: 24.3
- 2022: 25.0
- 2023: 23.3
- 2024: 23.4
- 2025: 23.1
- 2026: 22.8
- 2027: 22.5
- 2028: 22.2
- Private saving:
- 2020: 27.5
- 2021: 23.6
- 2022: 21.6
- 2023: 21.5
- 2024: 21.2
- 2025: 21.0
- 2026: 20.6
- 2027: 20.3
- Personal saving:
- 2020: 32.5
- 2021: 10.4
- 2022: 11.0
- 2023: 14.4
- 2024: 12.8
- 2025: 11.2
- 2026: 10.5
- 2027: 9.8
- 2028: 9.9
- Business saving:
- 2020: 7.3
- 2021: 8.7
- 2022: 10.0
- 2023: 10.8
- 2024: 10.3
- Gross domestic investment:
- 2020: 22.7
- 2021: 25.4
- 2022: 24.0
- 2023: 23.5
- General Government Fiscal Indicators 2/ (NA basis)
- Revenue:
- 2020: 41.4
- 2021: 42.5
- 2022: 41.1
- 2023: 41.9
- 2024: 41.3
- 2025: 41.2
- 2026: (value not provided)
- Expenditures:
- 2020: 52.4
- 2021: 45.4
- 2022: 41.0
- 2023: 42.2
- 2024: 42.1
- 2025: 42.0
- 2026: 41.8
- Overall balance:
- 2020: -10.9
- 2021: -2.9
- 2022: -1.2
- 2023: -1.0
- 2024: -0.8
- 2025: -0.7
- Structural balance 1/:
- 2020: -8.2
- 2021: -1.9
- 2022: -0.4
- Gross Debt:
- 2020: 118.2
- 2021: 113.5
- 2022: 107.4
- 2023: 107.0
- 2024: 104.9
- 2025: 102.1
- 2026: 100.1
- 2027: 98.4
- 2028: 96.8
- 2029: 95.2
- Net debt:
- 2020: 16.1
- 2021: 15.6
- 2022: 13.4
- 2023: 13.5
- 2024: 13.6
- Money and Credit (Annual average)
- Household Credit Growth:
- 2020: 5.2
- 2021: 5.0
- 2022: 3.5
- Business Credit Growth:
- 2020: -12.7
- 2021: 6.4
- 2022: (value not provided)
- Balance of Payments
- Current account balance 3/: -2.0 (Percent of GDP)
- Merchandise Trade balance 3/: -1.1 (Percent of GDP)
- Export volume (percent change):
- 2020: -7.7
- 2021: 4.5
- 2022: 3.3
- 2023: 3.1
- Import volume (percent change):
- 2020: 8.8
- 2021: 5.8
- 2022: 4.3
- 2023: 4.8
- Terms of trade:
- 2020: -3.3
- 2021: 4.7
- 2022: 0.5
IMF press release: Executive Board Concludes 2024 Article IV Consultation with Canada, July 16, 2024.
References
- https://www.imf.org/-/media/images/imf/bios/imfboard.jpg
- The Executive Board
- Canada and the IMF
- IMF Policy Advice -- A Factsheet
- Press Releases
- PRESS CENTER
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- http://www.IMF.org/external/np/sec/misc/qualifiers.htm
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