IMF Executive Board Concludes 2025 Article IV Consultation with Canada
IMF News, January 21, 2026
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- Published: January 21, 2026
Near-term outlook and adjustment to trade shock
- Canada is adjusting to a significant external trade shock amid heightened global uncertainty.
- Higher U.S. tariffs have disrupted tightly integrated North American supply chains and weighed on exports, investment, and confidence.
- The impact has been less severe than initially feared, reflecting USMCA exemptions, monetary easing, and targeted domestic support.
- Economic activity is expected to remain subdued in the near term, with output below potential as trade adjustment and uncertainty continue to restrain exports and investment, compounded by slower immigration.
- Inflation is projected to remain close to the 2 percent target, supported by softer demand and firms’ absorption of higher costs.
- The current account deficit is expected to narrow only gradually as trade uncertainty recedes and competitiveness gains take hold.
Risks to the outlook
- Risks have become more balanced but remain tilted to the downside.
- Key downside risks identified:
- Renewed tariff escalation or prolonged trade uncertainty could further weigh on investment and confidence.
- Tighter global financial conditions.
- A sharper slowdown in China.
- Domestic vulnerability: elevated household leverage, though mitigated by strong policy frameworks and fundamentals, including a positive net international investment position and stable external financing.
Financial system resilience and vulnerabilities
- The financial system remains resilient to severe solvency and liquidity shocks, consistent with FSAP findings and the 2025 Financial System Stability Assessment.
- Pockets of vulnerability persist:
- Commercial real estate exposures—particularly among pension funds and insurers.
- Expanding role of nonbank financial intermediation.
- Recommendations to bolster resilience:
- Strengthen data collection, stress testing, and supervisory coordination.
- Reinforce the effectiveness of AML/CFT frameworks.
- Housing: welcome for ongoing efforts to improve housing affordability; importance of carefully calibrating demand-side measures and expanding housing supply through coordinated federal–provincial–municipal action.
Fiscal policy assessment and recommendations
- Directors supported targeted, temporary fiscal support to cushion the adjustment from the trade shock.
- Ongoing efforts encouraged to reorient spending toward public investment and strengthen the medium-term fiscal framework.
- Welcomed measures:
- New capital budgeting framework.
- Comprehensive expenditure reviews.
- Fiscal strategy guidance:
- Gradual fiscal consolidation over the medium term.
- Improve transparency and accountability of public investment.
- Clarify the debt-to-GDP ratio as a formal fiscal anchor, supported by deficit and operating-balance paths as operational guides.
Monetary policy assessment
- Directors generally agreed that the current monetary policy stance is appropriate.
- Support for the central bank’s data-dependent approach to maintaining inflation at target, with flexibility to recalibrate as conditions evolve.
- Emphasis on continued clear and effective communication to maintain confidence, bolster transparency, and support orderly adjustment.
Structural reforms and medium-term priorities
- Weak productivity growth is a central medium-term challenge and key to improving economic performance and external balance.
- Structural reform priorities:
- Support investment, competition, and innovation.
- Revitalize business dynamism and strengthen innovation incentives.
- Deepen internal market integration by advancing provincial-level reforms.
- Carefully targeted and well-governed industrial policy, with strong guardrails.
- Climate vulnerability noted; some Directors emphasized maintaining climate-related goals.
- Trade strategy: remain anchored in openness and predictability, seek diversification and new opportunities, and deepen continental integration, including through the 2026 USMCA review.
Executive Board Assessment (summarized)
- Directors welcomed Canada’s resilience to large trade shocks and the authorities’ prudent policy response.
- Priority: prudently manage near-term adjustment while advancing structural reforms to lift productivity, competitiveness, and resilience.
- Called for nimble policy making and contingency planning given the uncertain external environment.
Key statistics and selected indicators (as reported)
- 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 growth (annual):
- 2022: 4.7
- 2023: 2.0
- 2024: 1.6
- 2025 (Proj.): 1.9
- 2026 (Proj.): 1.7
- Total domestic demand growth (annual):
- 2022: 5.6
- 2023: 0.3
- 2024: 2.3
- 2025 (Proj.): 1.5
- Private consumption growth (annual):
- 2022: 6.7
- 2023: 2.2
- 2024: 2.5
- 2025 (Proj.): 1.4
- 2026 (Proj.): 2.1
- 2027 (Proj.): 2.4
- Total investment growth (annual):
- 2022: 5.5
- 2023: -5.8
- 2024: -0.1
- 2025 (Proj.): 0.9
- Output gap (percent of potential GDP) 1/:
- 2022: 0.8
- 2023: -0.8
- 2024: -0.6
- 2025 (Proj.): -0.4
- 2026 (Proj.): -0.2
- Unemployment rate (average) 2/:
- 2022: 5.3
- 2023: 5.4
- 2024: 6.4
- 2025 (Proj.): 6.8
- 2026 (Proj.): 6.5
- 2027 (Proj.): 6.3
- 2028 (Proj.): 6.2
- 2029 (Proj.): 6.1
- 2030 (Proj.): 6.0
- 2031 (Proj.): (not listed)
- CPI inflation (average):
- 2022: 3.9
- Gross national saving (percent of GDP):
- 2022: 24.6
- 2023: 22.9
- 2024: 22.7
- 2025 (Proj.): 22.0
- 2026 (Proj.): 22.4
- 2027 (Proj.): 22.5
- 2028 (Proj.): 23.0
- 2029 (Proj.): 23.2
- 2030 (Proj.): 23.5
- Gross domestic investment (percent of GDP):
- 2022: 25.0
- 2023: 23.6
- 2024: 23.1
- 2025 (Proj.): 23.3
- 2026 (Proj.): 23.4
- General Government Fiscal Indicators (NA basis, percent of GDP):
- Revenue:
- 2022: 41.0
- 2023: 41.6
- 2024: 42.2
- 2025 (Proj.): 42.4
- 2026 (Proj.): 42.1
- 2027 (Proj.): 41.9
- 2028 (Proj.): 41.8
- 2029 (Proj.): 41.7
- Expenditures:
- 2022: 40.4
- 2023: 44.3
- 2024: 43.7
- 2025 (Proj.): 44.7
- 2026 (Proj.): 44.2
- 2027 (Proj.): 43.8
- 2028 (Proj.): 43.5
- 2029 (Proj.): 43.2
- Overall balance:
- 2022: -2.1
- 2023: -1.3
- 2024: -2.6
- 2025 (Proj.): -2.3
- 2026 (Proj.): -1.9
- 2027 (Proj.): -1.8
- 2028 (Proj.): -1.6
- 2029 (Proj.): -1.4
- Structural balance 1/:
- 2022: -1.7
- 2023: -1.5
- Gross Debt (percent of GDP):
- 2022: 103.5
- 2023: 105.0
- 2024: 110.0
- 2025 (Proj.): 110.6
- 2026 (Proj.): 110.9
- 2027 (Proj.): 109.8
- 2028 (Proj.): 108.0
- 2029 (Proj.): 106.3
- 2030 (Proj.): 104.3
- 2031 (Proj.): 102.4
- Net debt (percent of GDP):
- 2022: 13.4
- 2023: 12.8
- 2024: 10.9
- 2025 (Proj.): 9.7
- 2026 (Proj.): 10.3
- 2027 (Proj.): 11.1
- 2028 (Proj.): 11.2
- 2029 (Proj.): 11.0
- Household Credit Growth (annual average):
- 2022: 5.0
- 2023: 3.6
- 2024: 3.5
- 2025 (Proj.): 3.4
- Business Credit Growth (annual average):
- 2022: (not listed)
- 2023: (not listed)
- 2024: (not listed)
- 2025 (Proj.): (not listed)
- Balance of Payments:
- Current account balance 3/:
- 2022: -0.5
- 2023: -1.2
- Merchandise Trade balance 3/:
- 2022: 0.7
- 2023: -1.1
- 2024: -0.3
- Export volume (percent change):
- 2022: 3.0
- 2023: 4.1
- 2024: -3.2
- 2025 (Proj.): 1.1
- Import volume (percent change):
- 2022: 1.2
- 2023: 2.6
- Terms of trade:
- 2022: -5.9
1/ Percent of potential GDP. 2/ Percent. 3/ Percent of GDP.
IMF Executive Board Concludes 2025 Article IV Consultation with Canada — January 21, 2026.