Economy

IMF Says UK Economy Will Grow Faster Than Germany This Year

Published

1 year ago

May 23, 2023

(Bloomberg) — The UK economy will grow faster than Germany this year and avoid a recession, the International Monetary Fund said, after sharply upgrading its forecast on the back of strong household spending and better relations with the European Union.

Falling energy prices will also help Britain expand 0.4% this year, the IMF said on Tuesday in its regular health check on the UK economy. That’s up from the 0.3% contraction the fund projected just last month, and which will lift the UK off the bottom of the G-7 league table.

However, the global economic watchdog warned households that interest rates may need to rise further and stay high to ensure inflation is dealt with properly.

The prospect of faster growth will raise hopes in Prime Minister Rishi Sunak’s government that it can head into an expected general election next year offering tax cuts. The ruling Conservatives trail Labour by a double-digit margin in the polls as the country grapples with soaring inflation, weak growth, public sector strikes and rising taxes.

Sunak is trying to restore the government’s reputation for economic competence after the disaster of former premier Liz Truss’s economic plans last year, which sank the pound and roiled the bond markets.

In its regular Article IV report on the British economy, the IMF said its upgrade reflected better wage growth and “improved confidence amid somewhat reduced post-Brexit uncertainty.” But it also said households should brace for a tough second half of the year when the “peak impact” of higher borrowing costs will be felt.

Interest Rates

The BOE has raised rates to 4.5% from 0.1% since December 2021, the most aggressive cycle since the 1980s, but “some further monetary tightening will likely be needed, and rates may have to remain high for longer to bring down inflation more assuredly,” the IMF said.

Official UK data on Wednesday is expected to show inflation dropping to about 8.4% from 10.1% as a result of falling energy prices. The IMF expects inflation to fall to 5% by the end of the year, meeting Sunak’s pledge to halve the headline rate, but cautioned that it may “plateau at an elevated rate.”

The BOE’s remit is to bring inflation down to 2%, and the fund cautioned against “premature celebrations” by easing up as inflation automatically drops.

It also urged the government to beef up investment and spend more on Britain’s ailing public services to boost growth. Full-expensing, the government’s generous three-year 100% tax relief on capital investment, should be made permanent, planning should be reformed and the immigration regime needs “fine-tuning to alleviate sectoral and skilled labor shortages.”

With little headroom for extra spending, the IMF urged the government to raise funds by scrapping the triple lock on pensions — which ensures they rise by the highest of wages, inflation or 2.5% – and move to the simpler and less expensive “best practice of inflation-indexation.”

On the banks, the IMF said the UK should build a pre-funded deposit insurance regime like in the US to make it easier to handle any future bank collapses like Silicon Valley Bank UK earlier this year.

(Adds interest rates, further details from IMF report starting in seventh paragraph.)

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Economy

Minimum wage to hire higher-paid temporary foreign workers set to increase

Published

14 hours ago

October 21, 2024

Anne Joseph

OTTAWA – The federal government is expected to boost the minimum hourly wage that must be paid to temporary foreign workers in the high-wage stream as a way to encourage employers to hire more Canadian staff.

Under the current program’s high-wage labour market impact assessment (LMIA) stream, an employer must pay at least the median income in their province to qualify for a permit. A government official, who The Canadian Press is not naming because they are not authorized to speak publicly about the change, said Employment Minister Randy Boissonnault will announce Tuesday that the threshold will increase to 20 per cent above the provincial median hourly wage.

The change is scheduled to come into force on Nov. 8.

As with previous changes to the Temporary Foreign Worker program, the government’s goal is to encourage employers to hire more Canadian workers. The Liberal government has faced criticism for increasing the number of temporary residents allowed into Canada, which many have linked to housing shortages and a higher cost of living.

The program has also come under fire for allegations of mistreatment of workers.

A LMIA is required for an employer to hire a temporary foreign worker, and is used to demonstrate there aren’t enough Canadian workers to fill the positions they are filling.

In Ontario, the median hourly wage is $28.39 for the high-wage bracket, so once the change takes effect an employer will need to pay at least $34.07 per hour.

The government official estimates this change will affect up to 34,000 workers under the LMIA high-wage stream. Existing work permits will not be affected, but the official said the planned change will affect their renewals.

According to public data from Immigration, Refugees and Citizenship Canada, 183,820 temporary foreign worker permits became effective in 2023. That was up from 98,025 in 2019 — an 88 per cent increase.

The upcoming change is the latest in a series of moves to tighten eligibility rules in order to limit temporary residents, including international students and foreign workers. Those changes include imposing caps on the percentage of low-wage foreign workers in some sectors and ending permits in metropolitan areas with high unemployment rates.

Temporary foreign workers in the agriculture sector are not affected by past rule changes.

This report by The Canadian Press was first published Oct. 21, 2024.

— With files from Nojoud Al Mallees

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Economy

PBO projects deficit exceeded Liberals’ $40B pledge, economy to rebound in 2025

Published

5 days ago

October 17, 2024

Anne Joseph

OTTAWA – The parliamentary budget officer says the federal government likely failed to keep its deficit below its promised $40 billion cap in the last fiscal year.

However the PBO also projects in its latest economic and fiscal outlook today that weak economic growth this year will begin to rebound in 2025.

The budget watchdog estimates in its report that the federal government posted a $46.8 billion deficit for the 2023-24 fiscal year.

Finance Minister Chrystia Freeland pledged a year ago to keep the deficit capped at $40 billion and in her spring budget said the deficit for 2023-24 stayed in line with that promise.

The final tally of the last year’s deficit will be confirmed when the government publishes its annual public accounts report this fall.

The PBO says economic growth will remain tepid this year but will rebound in 2025 as the Bank of Canada’s interest rate cuts stimulate spending and business investment.

This report by The Canadian Press was first published Oct. 17, 2024.

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Economy

Statistics Canada says levels of food insecurity rose in 2022

Published

5 days ago

October 16, 2024

Anne Joseph

OTTAWA – Statistics Canada says the level of food insecurity increased in 2022 as inflation hit peak levels.

In a report using data from the Canadian community health survey, the agency says 15.6 per cent of households experienced some level of food insecurity in 2022 after being relatively stable from 2017 to 2021.

The reading was up from 9.6 per cent in 2017 and 11.6 per cent in 2018.

Statistics Canada says the prevalence of household food insecurity was slightly lower and stable during the pandemic years as it fell to 8.5 per cent in the fall of 2020 and 9.1 per cent in 2021.

In addition to an increase in the prevalence of food insecurity in 2022, the agency says there was an increase in the severity as more households reported moderate or severe food insecurity.

It also noted an increase in the number of Canadians living in moderately or severely food insecure households was also seen in the Canadian income survey data collected in the first half of 2023.

This report by The Canadian Press was first published Oct 16, 2024.

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