It’s fitting that G20 finance ministers and central bank governors will meet this week at Sao Paulo’s Biennale Pavilion, designed by famed architect Oscar Niemeyer. With its flowing lines and striking façade, it is a monument to the boldness of modern Brazil.
I hope the G20 takes inspiration from this landmark to act boldly, too. With recent improvement to the global-near term outlook, G20 policymakers have an opportunity to rebuild policy momentum, setting their sights on a more equitable, prosperous, sustainable, and cooperative future.
After several years of shocks, we expect global growth to reach 3.1 percent this year, with inflation falling and job markets holding up. This resilience provides a foundation to shift focus to the medium-term trends shaping the world economy. As our new report to the G20 makes clear, some of these trends—such as AI—hold promise to lift productivity and improve growth prospects. We badly need it—our projections for medium-term growth have declined to the lowest in decades.
Low global growth affects everyone, but has particularly troubling implications for emerging-market and developing economies. These countries impressively weathered successive global shocks, supported by stronger institutional and policy frameworks. But their slowing growth prospects have made convergence with advanced economies even more distant.
Other factors contribute to the complex global picture. Geoeconomic fragmentation is deepening as countries shift trade and capital flows. Climate risks are increasing and already affecting economic performance, from agricultural productivity to the reliability of transportation and the availability and cost of insurance. These risks may hold back regions with the most demographic potential, such as sub-Saharan Africa.
Against this backdrop, Brazil’s G20 agenda highlights key issues such as inclusion, sustainability, and global governance, with a welcome emphasis on eradicating poverty and hunger. This ambitious agenda, which the IMF is working to support, can guide policymakers at this pivotal moment in the global recovery.
Finishing the Job on Inflation
Central bankers are rightly focused on finishing the job of bringing inflation back to target. That’s especially important for poor families and low-income countries who have been disproportionately hit by high prices. But the welcome progress on reducing inflation means that the question of when and how much to ease interest rates will need to be carefully considered by major central banks this year.
As core inflation remains elevated in many countries, and upside risks to inflation remain, policymakers must carefully track underlying inflation developments and avoid easing too soon or too fast.
But where inflation is clearly moving toward target, countries should ensure that interest rates are not kept high for too long. Brazil’s early and resolute response to surging inflation during the pandemic is a good example of how nimble policymaking can pay off. The Central Bank of Brazil was among the first central banks to raise its policy rate, then loosen policy as inflation fell back toward its target range.
Tackling Debt and Deficits
With inflation cooling and economies better placed to absorb a tighter fiscal stance, the time has come for a renewed focus to rebuild buffers against future shocks, curb the rise of public debt, and create space for new spending priorities. Waiting could force a painful adjustment later. But, for the benefits to be durable, tightening should proceed at a carefully calibrated pace.
Finding the right balance is tricky, with higher interest rates and debt-servicing costs straining budgets—leaving less room for countries to provide essential services and invest in people and infrastructure. Any push to bring down debt and deficits should be grounded in credible medium-term fiscal plans. It should also include measures to minimize the impact on poor and vulnerable households while protecting priority investments.
It’s also vital for countries to continue making important strides in raising revenue and weeding out inefficiencies. Brazil has shown leadership in this area with its historic VAT reform. But many countries are lagging, with scope to broaden their tax base, close loopholes, and improve tax administration. This is why the G20 has asked us to launch a joint initiative with the World Bank to help countries boost domestic-resource mobilization.
In addition, countries should aim to build more inclusive and transparent tax systems, ensuring the international tax architecture takes into account the interests of developing countries.
Our work also continues under the Global Sovereign Debt Roundtable to come up with procedures to speed debt restructurings and make them more predictable. While progress has been made under the G20 Common Framework, with agreements on debt treatment by official creditors taking less time, faster improvements to the global debt-restructuring architecture may be required.
Growing the Economic Pie
Alongside monetary and fiscal measures that lay strong foundations, policymakers urgently need to address the drivers of medium-term growth.
In many countries, there are still opportunities to ease the most binding constraints to economic activity. For emerging-market economies, reforms in areas such as governance, business regulation and external sector policies could unleash productivity gains. But that’s only part of the story: economies must also prepare to harness structural forces that will define the coming decades.
Take the new climate economy. For some countries and regions, it will bring jobs, innovation, and investment. For those heavily reliant on fossil fuels, it could be more challenging. The question is how to maximize the opportunities and minimize the risks.
Policies to make polluters pay—such as carbon pricing—can create incentives to shift to low-carbon investments and consumption. IMF research shows that countries that take action on climate tend to stimulate green innovation and attract inflows of low-carbon technology and investment. Also, taxing the most polluting forms of international transportation could raise revenues that can be used to fight climate change, hunger and support the most vulnerable members of the population.
For many vulnerable countries, however, stronger growth alone will not be enough to realize their potential—they will need external support, both financial and technical.
This points to the importance of an international architecture that can meet the changing dynamics of the global economy.
A Stronger International System
As recent military conflicts have laid bare, we live in an increasingly polarized world. The tensions are fragmenting the global economy along geopolitical lines—around 3,000 trade-restricting measures were imposed in 2023, nearly three times the number in 2019. No country stands to gain from the splintering of the world economy into blocs. Restoring faith in international cooperation is critical.
In the eight decades since its founding, the Fund has continually evolved to meet the needs of its membership. Since the pandemic, we have deployed $354 billion in financing to 97 countries, including 57 low-income countries. With countries likely to face larger and more complex crises, countries must work together to reinforce the global financial safety net, with the IMF at its core.
Last year, our shareholders gave us a strong vote of confidence. Among other measures, they stepped up to meet our fundraising targets for the Poverty Reduction and Growth Trust, which provides interest-free loans to low-income countries. And our shareholders agreed to increase our permanent quota resources by 50 percent. G20 countries can lead the way by quickly ratifying the quota increase, which will allow us to maintain our lending capacity and reduce our reliance on borrowed resources.
But we can—and must—do more. Our membership also recognized the importance of realigning quota shares to better reflect members’ relative positions in the world economy, while protecting the voices of the poorest members. With that goal in mind, we are developing possible approaches to realignment, including through a new quota formula. This comes in addition to a third chair for Sub-Saharan Africa on our Executive Board for election at this year’s Annual Meetings—an important step that complements the African Union’s new status as a permanent member of the G20.
In the years ahead, global cooperation will be essential to manage geoeconomic fragmentation and reinvigorate trade, maximize the potential of AI without widening inequality, prevent bottlenecks on debt, and respond to climate change.
As Oscar Niemeyer once said, “architecture is invention.”
The founding of the global economic and financial architecture was a courageous feat of collective invention that lifted the lives of millions. Now the challenge is to make it stronger, more equitable, more balanced, and more sustainable, so millions more can benefit. To reach that goal, we must channel that inventive spirit once again.
OTTAWA – Canada’s unemployment rate held steady at 6.5 per cent last month as hiring remained weak across the economy.
Statistics Canada’s labour force survey on Friday said employment rose by a modest 15,000 jobs in October.
Business, building and support services saw the largest gain in employment.
Meanwhile, finance, insurance, real estate, rental and leasing experienced the largest decline.
Many economists see weakness in the job market continuing in the short term, before the Bank of Canada’s interest rate cuts spark a rebound in economic growth next year.
Despite ongoing softness in the labour market, however, strong wage growth has raged on in Canada. Average hourly wages in October grew 4.9 per cent from a year ago, reaching $35.76.
Friday’s report also shed some light on the financial health of households.
According to the agency, 28.8 per cent of Canadians aged 15 or older were living in a household that had difficulty meeting financial needs – like food and housing – in the previous four weeks.
That was down from 33.1 per cent in October 2023 and 35.5 per cent in October 2022, but still above the 20.4 per cent figure recorded in October 2020.
People living in a rented home were more likely to report difficulty meeting financial needs, with nearly four in 10 reporting that was the case.
That compares with just under a quarter of those living in an owned home by a household member.
Immigrants were also more likely to report facing financial strain last month, with about four out of 10 immigrants who landed in the last year doing so.
That compares with about three in 10 more established immigrants and one in four of people born in Canada.
This report by The Canadian Press was first published Nov. 8, 2024.
The Canadian Institute for Health Information says health-care spending in Canada is projected to reach a new high in 2024.
The annual report released Thursday says total health spending is expected to hit $372 billion, or $9,054 per Canadian.
CIHI’s national analysis predicts expenditures will rise by 5.7 per cent in 2024, compared to 4.5 per cent in 2023 and 1.7 per cent in 2022.
This year’s health spending is estimated to represent 12.4 per cent of Canada’s gross domestic product. Excluding two years of the pandemic, it would be the highest ratio in the country’s history.
While it’s not unusual for health expenditures to outpace economic growth, the report says this could be the case for the next several years due to Canada’s growing population and its aging demographic.
Canada’s per capita spending on health care in 2022 was among the highest in the world, but still less than countries such as the United States and Sweden.
The report notes that the Canadian dental and pharmacare plans could push health-care spending even further as more people who previously couldn’t afford these services start using them.
This report by The Canadian Press was first published Nov. 7, 2024.
Canadian Press health coverage receives support through a partnership with the Canadian Medical Association. CP is solely responsible for this content.
As Canadians wake up to news that Donald Trump will return to the White House, the president-elect’s protectionist stance is casting a spotlight on what effect his second term will have on Canada-U.S. economic ties.
Some Canadian business leaders have expressed worry over Trump’s promise to introduce a universal 10 per cent tariff on all American imports.
A Canadian Chamber of Commerce report released last month suggested those tariffs would shrink the Canadian economy, resulting in around $30 billion per year in economic costs.
More than 77 per cent of Canadian exports go to the U.S.
Canada’s manufacturing sector faces the biggest risk should Trump push forward on imposing broad tariffs, said Canadian Manufacturers and Exporters president and CEO Dennis Darby. He said the sector is the “most trade-exposed” within Canada.
“It’s in the U.S.’s best interest, it’s in our best interest, but most importantly for consumers across North America, that we’re able to trade goods, materials, ingredients, as we have under the trade agreements,” Darby said in an interview.
“It’s a more complex or complicated outcome than it would have been with the Democrats, but we’ve had to deal with this before and we’re going to do our best to deal with it again.”
American economists have also warned Trump’s plan could cause inflation and possibly a recession, which could have ripple effects in Canada.
It’s consumers who will ultimately feel the burden of any inflationary effect caused by broad tariffs, said Darby.
“A tariff tends to raise costs, and it ultimately raises prices, so that’s something that we have to be prepared for,” he said.
“It could tilt production mandates. A tariff makes goods more expensive, but on the same token, it also will make inputs for the U.S. more expensive.”
A report last month by TD economist Marc Ercolao said research shows a full-scale implementation of Trump’s tariff plan could lead to a near-five per cent reduction in Canadian export volumes to the U.S. by early-2027, relative to current baseline forecasts.
Retaliation by Canada would also increase costs for domestic producers, and push import volumes lower in the process.
“Slowing import activity mitigates some of the negative net trade impact on total GDP enough to avoid a technical recession, but still produces a period of extended stagnation through 2025 and 2026,” Ercolao said.
Since the Canada-United States-Mexico Agreement came into effect in 2020, trade between Canada and the U.S. has surged by 46 per cent, according to the Toronto Region Board of Trade.
With that deal is up for review in 2026, Canadian Chamber of Commerce president and CEO Candace Laing said the Canadian government “must collaborate effectively with the Trump administration to preserve and strengthen our bilateral economic partnership.”
“With an impressive $3.6 billion in daily trade, Canada and the United States are each other’s closest international partners. The secure and efficient flow of goods and people across our border … remains essential for the economies of both countries,” she said in a statement.
“By resisting tariffs and trade barriers that will only raise prices and hurt consumers in both countries, Canada and the United States can strengthen resilient cross-border supply chains that enhance our shared economic security.”
This report by The Canadian Press was first published Nov. 6, 2024.
