On 16 July 2016 the IMF issued a report following the conclusion of consultations with Canada under Article IV of the IMF’s articles of agreement.

The Canadian economy has avoided a recession, with GDP growth expected to increase slightly in 2024, supported by the normalization of monetary policy, some easing of fiscal policy, continued immigration, and the expansion of the Trans Mountain pipeline. Risks to the economy include an abrupt global slowdown that could reduce Canada’s growth; and tighter financial conditions that could negatively affect the economic outlook. On the upside, stronger growth could result from labour market resilience and stronger US demand. The IMF report notes that there are important structural challenges, including relatively low productivity growth and the deterioration of housing affordability. These require the government to engage in ambitious and proactive policy efforts.

The IMF supports the government’s prudent fiscal policy. A somewhat tighter stance in 2024 would support efforts to reduce inflation and rebuild buffers. The adoption of a formal fiscal framework could be even more effective. Coordination between fiscal and monetary policy is important.

The report notes that the financial system remains resilient, with sufficient buffers in place. The IMF Directors support the continued efforts to strengthen the anti-money laundering and combating the financing of terrorism (AML/CFT) framework.

The report notes that boosting productivity growth is important for Canada’s long term prospects. Harnessing advanced technologies, reducing interprovincial barriers to trade, integrating immigrants into the labour market and increasing female labour force participation are important for strengthening living standards. Further efforts are required at all levels of government to close the sizeable housing gap.

The report notes that carbon pricing is the most cost effective way to achieve the climate goals. Green industrial policies can also be important but in pursuing these policies Canada must avoid trade distortions and ensure that a level playing field is maintained for all companies.