IMF:Despite 2017 Upgrade,Canada GDP To Underperform US In 2018

By Yali N'Diaye

     OTTAWA (MNI) - The International Monetary Fund upgraded Tuesday its World

Economic Outlook for both 2017 and 2018, partly as a result of a stronger

performance in advanced economies this year, including Canada.

     With a 0.5-point upgrade to Canadian GDP growth in 2017 to 3.0% relative to

July, and a 0.1-point upward revision to U.S. GDP to 2.2%, Canada is now seen

outperforming its largest trading partner by 0.8 points this year, twice as much

as the 0.4-point outperformance expected in the July update.

     Like other oil-exporting countries such as Norway, the 2017 growth pickup

in Canada "reflects reduced drag from the adjustment to lower oil and gas prices

and accommodative fiscal and monetary policies."

     The Bank of Canada has signaled it will likely upgrade its growth forecast

for 2017 from the current 2.8%, Governor Stephen Poloz having acknowledged the

"huge" number in the second quarter, when annualized GDP reached 4.5%. The

central bank also expects growth to slow but to remain above potential in the

second half of this year. Growth potential is currently estimated around 1.5%

according to a recent speech from Deputy Governor Sylvain Leduc. The July

Monetary Policy Report said the range for potential output for Canada is 1.0% to

1.6% for 2017, and 1.1% to 1.7% for 2018.

     Despite the large upgrade to Canada's 2017 GDP growth projection, the IMF

still sees Canadian growth underperforming the U.S. in 2018 by 0.2 points, with

U.S. real GDP growth projected to pick up to 2.3%, while Canadian growth will

slow to 2.1%, both slightly above the Bank of Canada's estimates of 2.1% for the

U.S. and 2.0% for Canada.

     In addition, the IMF noted subdued inflation in "many other advanced

economies," Canada being no exception, with an annual average CPI of 1.8% in

2018 after 1.6% in 2017.

     "Sluggishness in core inflation in advanced economies - a surprise in view

of stronger-than-expected activity - has coincided with slow transmission of

declining unemployment rates into faster wage growth," the IMF said.

--MNI Ottawa Bureau; +1 613 869-0916; email: yali.ndiaye@marketnews.com

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