IMF's predictions regarding the economy are too optimistic

IMF's predictions regarding the economy are too optimistic

IMF

The International Monetary Fund’s predictions of the Canadian economy’s prospects for next year are far more optimistic than what is warranted by current figures, Deloitte Canada chief economist Craig Alexander stated.

In its latest outlook, the IMF pulled back its growth estimate for Canada to 1.5% this year, down from the 1.9% forecast in January.

However, Alexander contested the IMF’s prediction of a Canadian recovery of 1.9% in 2020, which will accompany an expected global growth of 3.6% that year.

“They’re too optimistic,” he told the Financial Post. “The reality is that many people’s expectations of what represents good growth are actually too high.”

The economist projected that Canadian GDP will grow by 1.3% in 2019, and then only a miniscule gain to 1.5% in 2020.

An important factor working through the market is the steadily increasing overall debt level, which has hobbled the purchasing power of a significant proportion of consumers, Alexander explained. The latter aspect is especially apparent in the precipitous decline of large retail and real estate purchases.

Moreover, businesses have by and large adapted conservative investment strategies for the time being, mainly due to global turmoil in financial markets. A long-term goal of surviving in this environment should push Canada to make its tax and regulatory regimes conducive to further competition and investment, Alexander stressed.

Earlier this month, Bank of Canada Governor Stephen Poloz assured that Canada’s economic slowdown will ultimately be a fleeting state of affairs. He cited modest economic growth at the beginning of the year, along with a flexible exchange rate, as elements buttressing the nation’s fundamentals.

“There are challenges in the Canadian and global economies that we need to manage, but there are clear signs that Canada is adjusting to the challenges,” Poloz said. “Recent economic data have been generally consistent with our expectation that the period of below-potential growth will prove to be temporary.”