The International Monetary Fund has slightly trimmed its forecast for Canadian economic growth, citing the continued downside risks posed by the oil shock.
In its spring World Economic Outlook, the IMF forecast that Canada's real gross domestic product will grow by 2.2 per cent this year and 2.0 per cent next year. Both projections are down by 0.1 percentage point from the financial institution's previous forecast, issued in January.
The IMF described Canadian growth as "solid," supported by the "stronger" U.S. recovery and the decline of the Canadian dollar.
"These developments have led to a welcome pickup in exports, but have yet to translate into strong investment and hiring," it said.
"But risks are tilted to the downside, because the unusually large fall in oil prices could further weaken business investment in the energy sector and lower employment growth," it cautioned.
The IMF said continued low interest rates from the Bank of Canada, together with further government fiscal consolidation, "would be conducive to rebalancing growth away from household consumption and toward business investment to generate a broader, more durable recovery."
It also recommended that "targeted macroprudential policies would help address high housing sector vulnerabilities."
The IMF predicts that the global economy will grow by 3.5 per cent this year, unchanged from its January forecast, and up only slightly from 2014's growth of 3.4 per cent. It said growth prospects for advanced economies have generally improved over last year, but it expects slower growth in emerging and developing markets, "primarily reflecting weaker prospects for some large emerging-market economies and oil-exporting countries."
"Advanced economies are generally benefiting from lower oil prices," it said.
The IMF expects the U.S. economy to grow by 3.1 per cent both this year and next, driven by strong domestic demand, which will get a boost from lower oil prices.
The report cited the oil price decline as a generally positive development for global growth. The IMF estimated that the 40-per-cent decline in oil prices since October's World Economic Outlook, if it were fully passed through to final prices, would result in about a 1-per-cent boost in global GDP in 2016.
The IMF said the risks to global economic growth are now "more balanced" than they were in its October, 2014, World Economic Outlook. However, they are "still tilted to the downside."
"A greater lift to demand from oil prices is a significant upside risk," it said. However, the downside risks "remain relevant," including geopolitical tensions and the potential for "disruptive asset price shifts" in financial markets.