## IMF Executive Board Concludes 2023 Article IV Consultation with Canada

_IMF News, July 27, 2023_

## Source details

**Canonical URL:** [IMF Executive Board Concludes 2023 Article IV Consultation with Canada](https://www.imf.org/en/news/articles/2023/07/27/pr23278-canada-imf-executive-board-concludes-2023-article-iv-consultation-with-canada)

## Other formats

- [Markdown version](/en/news/articles/2023/07/27/pr23278-canada-imf-executive-board-concludes-2023-article-iv-consultation-with-canada/index.md)
- [Structured JSON version](/en/news/articles/2023/07/27/pr23278-canada-imf-executive-board-concludes-2023-article-iv-consultation-with-canada/index.json)
- [Bundle manifest](/en/news/articles/2023/07/27/pr23278-canada-imf-executive-board-concludes-2023-article-iv-consultation-with-canada/bundle-manifest.json)

## Bibliographic details
- Published: July 27, 2023

---

### Overview and Executive Board Assessment
- The Executive Board concluded the Article IV consultation with Canada and considered and endorsed the staff appraisal without a meeting.
- The Canadian economy is decelerating, accompanied by a sharp decline in headline inflation, while core inflation has been stickier and short-term expectations remain elevated amid still-tight labor markets.
- The financial system appears broadly resilient despite global banking stresses and ongoing mortgage resets at higher interest rates; the housing market is rebounding, partly reflecting the substantial increase in immigration.
- The external position in 2022 was moderately weaker than the level implied by medium-term fundamentals and desirable policies.
- The outlook is subject to important downside risks; shocks could tip the economy into a mild recession.
- Tight macro policies remain necessary. Assuming the economy evolves in line with baseline projections:
  - Monetary policy should remain restrictive and data dependent.
  - Quantitative tightening should continue, and enhancements to monetary policy communication could be pursued.
  - Fiscal consolidation is proceeding, although at a slower pace than previously envisaged; fiscal policy should support inflation reduction goals.
  - A quantitative fiscal framework, including a specific debt anchor and a supporting operational rule, would enhance policy credibility and communication.
- Measures to promote housing affordability, particularly through increased supply, remain necessary.
- Financial-sector policy enhancements recommended include strengthening capital and liquidity requirements on smaller banks and expanding stress testing of NBFIs.
- Canada’s AML/CFT framework is generally appropriate but further focus is needed on assessment and mitigation of cross-border money laundering risks, particularly in the banking and real-estate sectors; the proposed Canada Financial Crimes Agency and steps toward beneficial-ownership registries are welcomed.

### Recent Developments and Outlook
- Growth and inflation:
  - Growth registered 3.4 percent in 2022, slowing sharply at the end of the year before rebounding in Q1:2023, driven primarily by strong trade and consumption.
  - Growth is expected to decline to 1.7 percent in 2023 due to the contractionary stance of monetary and fiscal policies.
  - Headline inflation fell from its June 2022 peak of 8.1 percent to 3.4 percent by May 2023.
  - Core inflation declined from around 6 percent last year to 3.7 percent in May 2023.
  - With continued tight policies and slowing growth, inflation is expected to approach the 2-percent target by end-2024.
- Risks:
  - External risks to a highly open economy like Canada are substantial and compound domestic vulnerabilities related to inflation expectations, the housing market, and household leverage.
  - Shocks could push the economy into a mild recession.

### Financial Sector and Housing
- The financial sector faces risks from:
  - High household leverage and housing-market developments.
  - Rising interest rates.
  - Global banking stresses.
- While resilient to date, scope exists to:
  - Strengthen capital and liquidity requirements on smaller banks.
  - Expand stress testing of NBFIs.
- Progress continues on the 2019 FSAP recommendations, but data gaps and fragmentation remain important issues highlighted by recent global market volatility.
- Housing market rebound noted; policies to improve affordability through increased supply are necessary.

### Structural and Climate-Related Issues
- Canada is positioning itself as a reliable supplier of critical minerals and energy and has attracted some major new green investments.
- Long-term challenges include:
  - Strengthening the investment climate.
  - Boosting productivity growth.
  - Implementing ambitious policies to achieve climate mitigation targets.
- Canada is among the world’s top-ten emitters of greenhouse gases, but announced climate mitigation policies should go a long way toward delivering its NDCs.
- Potential adverse competitiveness implications of climate policies could be mitigated by exchange rate flexibility and well-designed recycling of carbon tax revenues; remaining effects could be addressed through international cooperation, such as on a carbon price floor.
- Green industrial policies can help the transition but pose design risks; Canada should eschew approaches that distort trade.

### Projections and Scenarios (selected)
- Growth (Real GDP, percent change):
  - 2020: -5.1
  - 2021: 5.0
  - 2022: 3.4
  - 2023: 1.7
  - 2024: 1.4
  - 2025: 2.2
  - 2026: 1.9
- Total domestic demand (percent change):
  - 2020: -6.0
  - 2021: 6.6
  - 2022: 4.7
  - 2023: -0.5
  - 2024: 1.5
  - 2025: 2.6
  - 2026: 2.1
  - 2027: 2.0
- Private consumption (percent change):
  - 2020: -6.1
  - 2021: 4.8
  - 2022: 3.9
  - 2023: 2.3
  - 2024: 3.5
- Total investment (percent change):
  - 2020: -7.4
  - 2021: 13.9
  - 2022: 7.0
  - 2023: -9.5
  - 2024: 0.8
  - 2025: 2.5
  - 2026: 1.8
- Unemployment rate (average, percent):
  - 2020: 9.7
  - 2021: 7.5
  - 2022: 5.3
  - 2023: 5.5
  - 2024: 6.2
  - 2025: 6.1
  - 2026: 6.0
- CPI inflation (average):
  - 2020: 0.7
  - 2021: 6.8
  - 2022: 3.6

### Fiscal and Debt Indicators (percent of GDP)
- General government revenue:
  - 2020: 41.8
  - 2021: 41.5
  - 2022: 40.6
  - 2023: 40.7
  - 2024: 40.9
  - 2025: 41.0
- General government expenditures:
  - 2020: 52.7
  - 2021: 45.9
  - 2022: 41.4
  - 2023: 41.3
  - 2024: 41.2
  - 2025: 41.1
- Overall balance:
  - 2020: -10.9
  - 2021: -4.4
  - 2022: -0.8
  - 2023: -0.6
- Gross Debt:
  - 2020: 118.9
  - 2021: 115.1
  - 2022: 106.7
  - 2023: 105.8
  - 2024: 103.5
  - 2025: 101.0
  - 2026: 98.8
  - 2027: 96.7
  - 2028: 94.7
- Net debt:
  - 2020: 15.7
  - 2021: 15.4
  - 2022: 14.3
  - 2023: 14.4
  - 2024: 14.2
  - 2025: 14.0
  - 2026: 13.6

### Savings, Investment, Credit, and External Balances
- Gross national saving (percent of GDP):
  - 2020: 20.1
  - 2021: 23.5
  - 2022: 24.2
  - 2023: 21.5
  - 2024: 21.4
  - 2025: 21.2
  - 2026: 21.0
  - 2027: 20.8
  - 2028: 20.5
- Private saving (percent of GDP):
  - 2020: 26.9
  - 2021: 24.3
  - 2022: 21.7
  - 2023: 18.9
  - 2024: 19.0
  - 2025: 18.8
  - 2026: 18.5
  - 2027: 18.3
  - 2028: 18.0
- Personal saving (percent of GDP):
  - 2020: 32.3
  - 2021: 22.7
  - 2022: 12.0
  - 2023: -2.0
  - 2024: -2.2
  - 2025: -1.8
  - 2026: (not provided)
- Business saving (percent of GDP):
  - 2020: -5.5
  - 2021: 16.3
  - 2022: 16.7
  - 2023: 19.1
  - 2024: 19.8
- Gross domestic investment (percent of GDP):
  - 2020: 22.3
  - 2021: 23.8
  - 2022: 24.5
  - 2023: 23.0
  - 2024: 22.9
- Household Credit Growth (annual average):
  - 2020: 5.2
  - 2021: 10.8
  - 2022: 9.9
- Business Credit Growth (annual average):
  - 2020: -0.9
  - 2021: -12.7
  - 2022: 6.4
- Balance of Payments:
  - Current account balance (percent of GDP):
    - 2020: -1.7
    - 2021: -1.9
    - 2022: -2.4
  - Merchandise Trade balance (percent of GDP):
    - 2020: 0.2
    - 2021: -1.1
    - 2022: -1.4
  - Export volume (percent change):
    - 2020: -7.9
    - 2021: 5.9
    - 2022: 1.2
    - 2023: 3.1
  - Import volume (percent change):
    - 2020: -7.1
    - 2021: 8.7
    - 2022: 3.8
    - 2023: 4.2
    - 2024: 4.6
    - 2025: 4.5
  - Terms of trade:
    - 2020: -3.4
    - 2021: -9.0
    - 2022: 0.0

### Key Country Indicators
- Nominal GDP (2022): Can$ 2,785 billion (US$ 2,139 billion)
- Quota: SDR 11,023.9 million
- Population (2022): 39.6 million
- GDP per capita (2022): US$ 54,015
- Main exports: Oil and gas, autos and auto parts, gold, lumber, copper.

*IMF Press Release No. 23/278; data presented in the Press Release were based on information available as of July 13, 2023.*

---


## References

- [Canada and the IMF](http://www.imf.org/external/country/CAN/index.htm)
- [IMF Policy Advice -- A Factsheet](https://www.imf.org/en/about/factsheets/imf-surveillance)
- [Press Releases](https://www.imf.org/en/news/searchnews)
- [PRESS CENTER](http://presscenter.imf.org/)
- [https://www.imf.org/en/home](https://www.imf.org/en/home)

_Source: https://www.imf.org/en/news/articles/2023/07/27/pr23278-canada-imf-executive-board-concludes-2023-article-iv-consultation-with-canada_