IMF Chief Economist Pierre-Olivier Gourinchas and IMF Research Department Deputy Director Petya Koeva Brooks hold a news briefing at IMF headquarters, in Washington, on April 16.MANDEL NGAN/Getty Images
The International Monetary Fund has upgraded its outlook for the global economy this year, saying the world appears headed for a “soft landing” – reining in inflation without much economic pain and producing steady if modest growth.
The IMF now envisions 3.2 per cent worldwide expansion this year, up a tick from the 3.1 per cent it had predicted in January and matching 2023′s pace. And it foresees a third straight year of 3.2 per cent growth in 2025.
In its latest outlook, the IMF, a 190-country lending organization, notes that the global expansion is being powered by unexpectedly strong growth in the United States, the world’s largest economy. The IMF expects the U.S. economy to grow 2.7 per cent this year, an upgrade from the 2.1 per cent it had predicted in January and faster than a solid 2.5 per cent expansion in 2023.
Though sharp price increases remain an obstacle across the world, the IMF foresees global inflation tumbling from 6.8 per cent last year to 5.9 per cent in 2024 and 4.5 per cent next year. In the world’s advanced economies alone, the organization envisions inflation falling from 4.6 per cent in 2023 to 2.6 per cent this year and 2 per cent in 2025, brought down by the effects of higher interest rates.
The Federal Reserve, the Bank of Japan, the European Central Bank and the Bank of England have all sharply raised rates with the aim of slowing inflation to around 2 per cent. In the United States, year-over-year inflation has plummeted from a peak of 9.1 per cent in the summer of 2022 to 3.5 per cent. Still, U.S. inflation remains persistently above the Fed’s target level, which will likely delay any rate cuts by the U.S. central bank.
Globally, higher borrowing rates had been widely expected to cause severe economic pain – even a recession – including in the United States. But it hasn’t happened. Growth and hiring have endured even as inflation has decelerated.
“Despite many gloomy predictions, the global economy has held steady, and inflation has been returning to target,” Pierre-Olivier Gourinchas, the IMF’s chief economist, told reporters ahead the release of the fund’s latest World Economic Outlook.
Though the world economy is showing unexpected resilience, it isn’t exactly strong. From 2000 through 2019, global economic growth had averaged 3.8 per cent – much higher than the 3.2 per cent IMF forecasts for this year and next. Keeping a lid on the world’s growth prospects are the continued high interest rates, along with sluggish gains in productivity in much of the world and the withdrawal of government economic aid that was rolled out during the pandemic.
The IMF warns that the economic expansion could be thrown off by the continuing adverse effects of higher rates and by geopolitical tensions, including the war in Gaza, that risk disrupting trade and raising energy and other prices.
China, the world’s No. 2 economy, has been struggling with the collapse of its real estate market, depressed consumer and business confidence and rising trade tensions with other major nations. The IMF expects the Chinese economy, which once regularly generated double-digit annual growth, to slow from 5.2 per cent in 2023 to 4.6 per cent in 2024 to 4.1 per cent next year.
But on Tuesday, Beijing reported that China’s economy expanded at a faster-than-expected pace in the first three months of the year, fueled by policies that are intended to stimulate growth and stronger demand. The Chinese economy expanded at a 5.3 per cent annual pace in January-March, surpassing analysts’ forecasts of about 4.8 per cent, official data show. Compared with the previous quarter, the economy grew 1.6 per cent.
Japan’s economy, the world’s fourth-largest, having lost the No. 3 spot to Germany last year, is expected to slow from 1.9 per cent last year to 0.9 per cent in 2024.
Among the 20 countries that use the euro currency, the IMF expects growth of just 0.8 per cent this year – weak but double the eurozone’s 2023 expansion. The United Kingdom is expected to make slow economic progress, with growth rising from 0.1 per cent last year to 0.5 per cent in 2024 and 1.5 per cent next year.
In the developing world, India is expected to continue outgrowing China, though the expansion in the world’s fifth-largest economy will slow, from 7.8 per cent last year to 6.8 per cent this year and 6.5 per cent in 2025.
The IMF foresees a steady but slow acceleration of growth in sub-Saharan Africa – from 3.4 per cent last year to 3.8 per cent in 2024 to 4.1 per cent next year.
In Latin America, the economies of Brazil and Mexico are expected to decelerate through 2025. Brazil is likely to be hobbled by interest high rates and Mexico by government budget cuts.
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.
