International Monetary Fund report confirms resilience of Canadian economy
News release
December 8, 2022 - Ottawa, Ontario - Department of Finance Canada
Today, the Honourable Chrystia Freeland, Deputy Prime Minister and Minister of Finance, welcomed the International Monetary Fund (IMF)’s Staff Report for the 2022 Article IV Consultation, which concludes its annual Article IV mission to Canada.
The report, which follows the IMF’s preliminary findings released in October, continues to highlight the resilience of the Canadian economy in the context of high global inflation, rising interest rates, and slowing global growth.
The IMF report highlights Canada’s tightened fiscal and monetary policy stance, while noting that bringing inflation down quickly and decisively remains the chief priority facing both the Canadian and global economies. Today’s report projects that inflation in Canada will return to the 2 per cent target by the end of 2024.
The IMF continues to praise the federal government’s deficit reduction plan and the publication of long-term fiscal projections as “welcome steps toward strengthening the fiscal framework.” The IMF’s latest projections show that Canada is expected to have the smallest deficit this year as a share of GDP among G7 countries, and by far the lowest general government net debt as a share of GDP in the G7.
The federal government’s fiscal anchor—the unwinding of COVID-19-related deficits and reducing the federal debt-to-GDP ratio over the medium term—remains unchanged, with the federal debt-to-GDP ratio projected to continuously decline on a steeper downward track than projected in Budget 2022.
Regarding affordability challenges, the report validates the government’s targeted approach to inflation relief, noting “more generalized spending increases should be avoided so as not to undercut monetary policy.”
The report also draws attention to the work the government is doing to address the housing affordability challenge facing many Canadians. The IMF specifically notes the positive impact that the launch of the Housing Accelerator Fund will have in boosting housing development, which will both increase supply and help to moderate housing prices.
Finally, the IMF commends Canada's climate plan, noting that “Canada deserves substantial credit for its ambitious plans” while also highlighting Canada as a global role model for its large commitments of climate financing for developing nations.
Quotes
“Today Canada’s economy is 103 per cent the size it was before the pandemic, and so far this year, our economic growth has been the strongest in the G7. In October alone, employment in Canada rose by 108,000 jobs. In November, our unemployment rate fell to just 5.1 per cent. We have recovered 117 per cent of the jobs lost to COVID, which means 523,000 more Canadians are working today than before COVID first hit. As we contend with the pandemic’s aftershocks, this remarkable economic recovery has allowed us to reinforce Canada’s social safety net without pouring fuel on the fire of inflation. And critically, it means that Canada faces the global economic slowdown from a position of fundamental strength.”
The Honourable Chrystia Freeland, Deputy Prime Minister and Minister of Finance
Quick facts
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The IMF’s annual Article IV missions assess the economic and financial developments in a country and take into account discussions with government officials, central bank officials, and representatives of business, labour unions, and civil society.
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Canada is expected to have the lowest total government deficit as a percentage of GDP in the G7 this year—a track Canada is forecast to maintain for the next three years.
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Canada is also expected to have the lowest net debt burden as a share of GDP in the G7. Canada’s debt-to-GDP ratio in 2022 is less than one-third of the average among G7 countries.
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The IMF expects Canada to have the second strongest economic growth in the G7 both this year and in 2023, projecting that real GDP in Canada will expand by 3.3 per cent in 2022 and 1.5 per cent in 2023.
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This is consistent with the recent OECD projections that Canada will have one of the strongest rates of economic growth in the G7 in both 2022 and 2023 and that the country will continue to be a leader in the G7, with the smallest deficit- and net debt-to-GDP ratios.
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Office of the Deputy Prime Minister and Minister of Finance
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