The International Monetary Fund (IMF) has struck an optimistic tone on the recovery of Canada from the worst of the COVID-19 pandemic and upgraded its view of the economic growth of Canada in 2021 by the most among all advanced economies.
In a recently published World Economic Outlook, the IMF said it expects the economy of Canada to witness 5 percent growth over the course of 2021, implying 1.4 percentage points growth over its previous forecast. That offers more optimism than the Bank of Canada’s expectation of four percent economic growth in 2021, via the central bank’s last official estimate that was made in January as COVID vaccines were about to be administered.
As a matter of fact, the IMF is expecting that global economic output will rebound six percent in 2021, and witness a further 4.4 percent in 2022. However, the IMF warned that significant uncertainties persist as new COVID variants of concern spread and vaccines are unevenly distributed across continents and countries.
In a statement released, IMF Economic Counsellor and Research Department Director Gita Gopinath said a multi-speed worldwide economic recovery could facilitate unexpected circumstances, which could be risky for the recovery.
Gita said: “A high degree of uncertainty surrounds our projections. Faster progress with vaccinations can uplift the forecast, while a more prolonged pandemic with virus variants that evade vaccines can lead to a sharp downgrade. Multi-speed recoveries could pose financial risks if interest rates in the United States rise further in unexpected ways.
“This could cause inflated asset valuations to unwind in a disorderly manner, financial conditions to tighten sharply, and recovery prospects to deteriorate, especially for some highly leveraged emerging markets and developing economies.”
The the overall global economic outlook is getting better, it will take time for output to get back to pre-pandemic levels. Out of the advanced economies, the United States’ economy is the only economy projected to go beyond pre-pandemic expectations for overall output in 2022 but the economy of Canada has grown for nine consecutive months through January but output still remains about three percent below pre-pandemic levels.