IMF Reports Reveals Canadian Economy Ranks High on G7

The International Monetary Fund (IMF) has released their latest forecast, informing the world that Canada will continue to outperform most economically advance countries over the next two years, even as we see the pace slowing down and risks increase.

What did the IMF report?

In the IMF’s latest forecast, it presents Canada as a relative sea of tranquility and rising global turbulence from European and U.S. debt issues, growing inflationary pressures, as well as the aftermath of the disasters seen in Japan.

With everything taken into account, it will result in growth in advanced countries of about 2.5%, which is about half a point lower than last year. Emerging economies as a group will suffer a one point drop in growth to 6.5%.

The IMF predicts that Canada will have 2.9% growth this year, and 2.6% growth in 2012. These numbers are virtually unchanged since its previous forecast in April.

This projection is in line with a new forecast from TD Bank, which sees the global economy slowing down, but Canada hanging on with 2.8% and 2.5% growth rates for 2011 and 212 respectively.

What are the risks?

Compared to the previous IMF report, the downside risks to outlook have risen a lot.

The balance of risks point down more; the downside risks due to heightened potential spillovers from further deterioration in market confidence, particularly in the Euro area has risen. There are also market concerns about possible setbacks to the U.S. recovery has also surfaced.

In the end the fundamental driers for growth are still in place.

The biggest change in the IMF’s report concerning risks is the heightened potential for negative consequences from the European debt crisis and fiscal hangovers in the U.S. and Japan.

With that said the IMF has expressed the concern on the fact that the two economic powerhouses must get their fiscal houses in order.

This includes the United State and Japan, explaining that it is critical to immediately address the debt ceiling; these powerhouses must create a deficit reduction plan addresses entitlement reform and revenue raising tax reform.

In the end, Canada stands near the top of the G7, despite what risks are present. This goes to show that Canada went through the recession well and continues to outperform and show the world what it is capable of.

image source: Mike Licht, NotionsCapital.com