{
  "title": "Canada: Staff Concluding Statement of the 2025 Article IV Mission",
  "publication": "IMF News, December 5, 2025",
  "sourceUrl": "https://www.imf.org/en/news/articles/2025/12/05/cs-canada-staff-concluding-statement-of-the-2025-article-iv-mission",
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  "summary": "An International Monetary Fund (IMF) mission, led by Mr. Ashvin Ahuja, visited Ottawa during November 12-20 and held concluding meetings on December 2-4 for the 2025 Article IV consultation. At the end of the discussions, the mission issued the following statement:",
  "publishDate": "2025-12-05",
  "sections": [
    {
      "heading": "Mission overview and context",
      "content": "- IMF mission led by Mr. Ashvin Ahuja visited Ottawa during November 12-20 and held concluding meetings on December 2-4 for the 2025 Article IV consultation.\n- The authorities consented to publication; the statement reflects IMF staff views and will inform a staff report for the IMF Executive Board."
    },
    {
      "heading": "I. Recent economic outcomes",
      "content": "- Key findings:\n  - Canada’s economy has held up better than expected despite a significant external trade shock from U.S. tariff increases and Canada’s more limited, now largely withdrawn, retaliatory measures.\n  - Tightly integrated North American supply chains were disrupted, raising input costs and weakening output, employment, and investment—most pronounced in trade-exposed sectors.\n  - Continued CUSMA exemptions and firms’ early adjustments mitigated the shock, but exports fell back and business investment slowed after a brief front-loading of exports and a sharp mid-2025 adjustment.\n  - Lower commodity prices, softer external demand, slowing immigration, and tariff uncertainty added to the drag, exposing long-standing structural headwinds: weak productivity, slow capital deepening, and lagging innovation.\n  - Recent policy actions, including targeted support to affected firms and measures in Budget 2025 to encourage investment, have helped cushion the blow.\n- Inflation and monetary policy:\n  - Headline inflation is near 2 percent and core measures are softening.\n  - With expectations anchored and the economy operating below potential, the decision to lower the policy rate to 2¼ percent is judged appropriate.\n- External and fiscal positions:\n  - The external current account deficit widened as exports to the United States declined; reorientation toward Europe and Asia only partly offset losses.\n  - Fiscal policy provided measured support through 2025 (middle-income tax relief, repeal of the consumer carbon tax, liquidity, investment, and procurement support) while preserving space to respond to evolving conditions."
    },
    {
      "heading": "II. Outlook and risks",
      "content": "- Near-term outlook:\n  - Output is expected to remain below potential through 2026 as weak exports, investment, and softer hiring continue to restrain activity.\n  - Inflation should hover around 2 percent, with softer demand and firms’ cost absorption keeping underlying pressures contained.\n  - The current account deficit is projected to narrow only gradually as net exports recover gradually and competitiveness gains take time.\n- Risks:\n  - Downside risks: renewed escalation of tariffs, tighter global financial conditions, sharper slowdown in China depressing commodity prices and exports, and elevated household debt exposing consumption to labor-market shocks.\n  - Upside risks: more constructive U.S. trade backdrop, faster internal market integration, stronger execution of supply-side reforms and priority infrastructure investment.\n  - Canada’s buffers: positive NIIP and reliable access to external financing."
    },
    {
      "heading": "III. Macroeconomic policy response (findings and recommendations)",
      "content": "- Monetary policy:\n  - Remain focused on keeping inflation low and stable amid trade uncertainty and a more supportive fiscal stance; current stance is appropriate.\n  - Further easing could be considered if underlying pressures continue to fade and slack widens, accounting for how fiscal measures shape demand and supply.\n  - Communication: the Bank’s shift back to publishing a central forecast is welcome; conditional paths under different scenarios can improve market understanding without implying pre-commitment.\n- Fiscal policy:\n  - Continue measured, counter-cyclical, and flexible policy. A modestly expansionary stance is appropriate to cushion softer external demand given fiscal space from low net debt and contained deficits.\n  - If the trade shock intensifies: allow automatic stabilizers to operate fully, complement with temporary, targeted measures, and provide a transparent path back to anchors once conditions normalize.\n  - If conditions improve: withdraw support sooner and consolidate while protecting high-quality investment in productivity, infrastructure, and housing.\n- Fiscal framework and public investment:\n  - A clear debt-to-GDP anchor should remain central. Budget 2025 pivots toward higher public investment while maintaining discipline through new deficit and operating-balance anchors.\n  - Recommendation: elevate the debt ratio from an indicator to a formal anchor, positioning deficit and operating-balance paths as complementary instruments to reinforce accountability and credibility.\n  - Capital-budgeting framework: design a clearer bridge between the new framework and standard statistical classifications; establish an independent mechanism to validate classifications ex ante and assess compliance ex post.\n  - Expenditure control: commit to comprehensive expenditure reviews, clear targets, transparent reporting, and timely delivery beginning with the upcoming Main Estimates."
    },
    {
      "heading": "IV. Housing affordability (findings and recommendations)",
      "content": "- Findings:\n  - Affordability pressures remain severe in several major cities despite tentative cooling; structural supply gaps (limited land, protracted permitting, municipal infrastructure gaps, low construction-sector productivity) underpin challenges.\n  - Softer labor markets and slower population growth have tempered demand but have not resolved structural supply constraints.\n- Supply-side recommendations:\n  - Continue well-targeted supply push: Build Canada Homes, Housing Accelerator Fund, expanded CMHC financing, Canada Housing Infrastructure Fund.\n  - In key metros, consider reducing development charges, but prioritize sustained zoning reform, streamlined approvals, and coordinated federal–provincial–municipal action.\n- Demand-side recommendations:\n  - Demand measures should be tightly focused; first-time homebuyer incentives must avoid reigniting price pressures before supply expands.\n  - Federal foreign-buyer ban and provincial/municipal non-resident taxes are capital-flow management measures under the IMF’s Institutional View.\n  - Over time, consider replacing these measures with broad-based, non-discriminatory taxes on speculative activity to widen participation, reduce compliance burdens, and channel capital to support new supply."
    },
    {
      "heading": "V. Financial stability (findings and recommendations)",
      "content": "- System resilience and supervisory priorities:\n  - The 2025 FSAP found banks and major NBFIs resilient to severe liquidity and solvency shocks; crisis-management and supervisory-coordination frameworks are broadly strong.\n  - Supervision intensification is underway—governance, non-financial risks, and financial-integrity compliance—and monitoring of cross-border exposures and market-based finance has expanded.\n  - Further efforts needed: strengthen information-sharing arrangements, supervisory autonomy, prudential oversight, and more frequent risk-based onsite inspections—especially for banks and financial-integrity risks.\n  - Timely enforcement with clearer sanctioning powers would strengthen AML/CFT credibility.\n- Risks outside core banking:\n  - NBFIs are growing with deeper cross-border linkages; liquidity mismatches, leverage, and large U.S. hedge-fund positions in Canadian fixed-income and repo markets could amplify stress.\n  - Recommendations: strengthen data collection on cross-border activities, expand system-wide stress testing, and deepen federal–provincial coordination.\n  - The Bank’s contingent liquidity facility for NBFIs material to core funding markets is an important backstop.\n- Macroprudential policy:\n  - Borrower-based tools should continue to contain leverage given elevated household debt and stretched valuations.\n  - Recommendations: extend the Domestic Stability Buffer to all systemically important DTIs and establish a positive neutral countercyclical capital buffer for others.\n  - If housing pressures re-emerge, tighten borrower-based limits further, especially for higher-risk segments."
    },
    {
      "heading": "VI. Reinvigorating growth (findings and policy priorities)",
      "content": "- Principal constraint:\n  - Canada’s productivity shortfall—weak business dynamism, slow capital deepening, and lagging innovation—is the principal long-term growth constraint.\n  - Entry and scaling have become more difficult; high market concentration in key service industries dampens competitive pressure and slows reallocation.\n- Competition and business dynamism:\n  - Strengthen Competition Bureau’s mandate and sustain resourcing for enforcement and market studies.\n  - Lower barriers to entry and scaling via simpler licensing, clearer regulatory standards, and reduced burdens on smaller and newer firms.\n  - Make it easier for firms and consumers to challenge anti-competitive conduct before the Competition Tribunal.\n  - Routinely screen new regulations for provisions that impede entry, raise costs, or entrench incumbents.\n- Budget 2025 and support for innovation:\n  - Expanded SR&ED support, Major Projects initiatives, and improved predictability will strengthen research infrastructure and accelerate clean energy and critical minerals development.\n  - Strengthen commercialization pathways, advance a Venture Capital and Growth Catalyst Initiative, and deepen the pool of scientists and engineers.\n- Financial sector competition and resilience:\n  - Legislation on fiat-backed stablecoin issuance under Bank of Canada oversight and rollout of the Consumer-Driven Banking Framework will expand secure data sharing and enable new business models.\n  - Ease entry and streamline regulation to support greater choice, competition, and capital deployment.\n- Pro-growth tax policy:\n  - The Productivity Super-Deduction and Accelerated Investment Incentive will cut the marginal effective tax rate on new capital by over two percentage points, reinforcing Canada as the most tax-competitive country for new business investment in the G7.\n  - Sustain a simple, broad-based system, transparently evaluate major tax expenditures, and assess options to strengthen the GST base over time.\n- Industrial policy guardrails:\n  - Support for firms in transition should remain conditional on business viability; sector-specific subsidies, procurement mandates, or exemptions should be narrow, time-bound, and tied to clear market failures.\n  - Ensure competitive neutrality in eligibility and allocation to avoid incumbent advantage and preserve contestability.\n- Internal market integration:\n  - Removing subnational frictions (differing standards, licensing rules, procurement preferences, labor mobility restrictions) could lift real GDP by up to 7 percent over time, with especially large gains in services.\n  - Priorities: mutual recognition of credentials, CFTA-aligned sub-national procurement, harmonized inspection and safety certifications.\n- Trade strategy:\n  - Anchor trade strategy in openness and predictability while balancing diversification with deeper North American integration.\n  - Diversification toward Europe and the Indo-Pacific will strengthen resilience but will take time given continental supply-chain integration.\n  - The 2026 USMCA review is pivotal for updating rules on critical minerals, digital trade, and clean technology."
    },
    {
      "heading": "Selected economic indicators (from Table 1)",
      "content": "- Nominal GDP (2024): Can$ 2,934 billion (US$ 2,173 billion)\n- Quota: SDR 11,023.9 million\n- GDP per capita (2024): US$ 54,531\n- Population (2024): 41.1 million\n- Main exports: Oil and gas, autos and auto parts, gold, lumber, copper.\n- Real GDP (percentage change):\n  - 2022: 4.7\n  - 2023: 2.0\n  - 2024: 1.6\n  - 2025 (Proj.): 1.9\n  - 2026: 1.7\n- Unemployment rate (average) (percent):\n  - 2022: 5.3\n  - 2023: 5.4\n  - 2024: 6.4\n  - 2025: 6.8\n  - 2026: 6.5\n  - 2027: 6.3\n  - 2028: 6.2\n  - 2029: 6.1\n  - 2030: 6.0\n- CPI inflation (average): 3.9\n- Gross national saving (percent of GDP):\n  - 2022: 24.6\n  - 2023: 22.9\n  - 2024: 22.7\n  - 2025 (Proj.): 22.0\n  - 2026: 22.4\n  - 2027: 22.5\n  - 2028: 23.0\n  - 2029: 23.2\n  - 2030: 23.5\n- General government fiscal indicators (NA basis, percent of GDP):\n  - Revenue: 41.0, 41.6, 42.2, 42.4, 42.1, 41.9, 41.8, 41.7\n  - Expenditures: 40.4, 44.3, 43.7, 44.6, 44.2, 43.4, 43.2\n  - Overall balance: -2.1, -1.3, -2.6, -2.3, -1.9, -1.8, -1.6, -1.5\n  - Gross Debt: 103.7, 106.6, 110.0, 109.1, 109.2, 108.1, 106.5, 104.8, 103.2, 101.4\n  - Net debt: 13.6, 14.3, 12.3, 12.0, 12.7, 13.2, 13.4, 13.1\n- Current account balance (percent of GDP): -0.5, -1.2\n- Merchandise Trade balance (percent of GDP): 0.7, -1.1, -0.3\n- Export volume (percent change): 3.0, 4.1, -3.2, 1.1\n- Terms of trade: -5.9\n\nSource: IMF staff concluding statement of the 2025 Article IV mission to Canada, December 5, 2025.\n\n---\n\n\n References\n\n- Canada and the IMF\n- IMF Policy Advice -- A Factsheet\n- Mission Concluding Statements\n- PRESS CENTER\n- Article IV\n- https://www.imf.org/en/home\n\nSource: https://www.imf.org/en/news/articles/2025/12/05/cs-canada-staff-concluding-statement-of-the-2025-article-iv-mission"
    }
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    "Published: December 5, 2025",
    "IMF mission led by Mr. Ashvin Ahuja visited Ottawa during November 12-20 and held concluding meetings on December 2-4 for the 2025 Article IV consultation.",
    "The authorities consented to publication; the statement reflects IMF staff views and will inform a staff report for the IMF Executive Board.",
    "Key findings:",
    "Inflation and monetary policy:",
    "External and fiscal positions:",
    "Near-term outlook:",
    "Risks:",
    "Monetary policy:",
    "Fiscal policy:",
    "Fiscal framework and public investment:",
    "Findings:",
    "Supply-side recommendations:",
    "Demand-side recommendations:",
    "System resilience and supervisory priorities:",
    "Risks outside core banking:",
    "Macroprudential policy:",
    "Principal constraint:",
    "Competition and business dynamism:",
    "Budget 2025 and support for innovation:",
    "Financial sector competition and resilience:",
    "Pro-growth tax policy:",
    "Industrial policy guardrails:",
    "Internal market integration:",
    "Trade strategy:",
    "Nominal GDP (2024): Can$ 2,934 billion (US$ 2,173 billion)",
    "Quota: SDR 11,023.9 million",
    "GDP per capita (2024): US$ 54,531",
    "Population (2024): 41.1 million",
    "Main exports: Oil and gas, autos and auto parts, gold, lumber, copper.",
    "Real GDP (percentage change):",
    "Unemployment rate (average) (percent):",
    "CPI inflation (average): 3.9",
    "Gross national saving (percent of GDP):",
    "General government fiscal indicators (NA basis, percent of GDP):",
    "Current account balance (percent of GDP): -0.5, -1.2",
    "Merchandise Trade balance (percent of GDP): 0.7, -1.1, -0.3",
    "Export volume (percent change): 3.0, 4.1, -3.2, 1.1",
    "Terms of trade: -5.9",
    "[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)",
    "[Mission Concluding Statements](https://www.imf.org/en/news/searchnews)",
    "[PRESS CENTER](http://presscenter.imf.org/)",
    "[Article IV](https://www.imf.org/external/pubs/ft/aa/index.htm)",
    "[https://www.imf.org/en/home](https://www.imf.org/en/home)"
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