The International Monetary Fund has cut its expectations for how the Canadian economy will perform this year and next.
The international group projects Canada's GDP will expand by 1.5 per cent this year and by 1.9 per cent next year. That's better than the 1.2 per cent performance clocked in 2015, but a pullback from what the IMF was expecting in January, which was 1.7 this year and 2.1 per cent next year.
The drag from the energy sector will be "offset partially by a more competitive currency and an expected increase in public investment," the IMF said.
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The unemployment rate is expected to rise to 7.3 per cent by the end of this year before ticking up to 7.4 per cent next year, the IMF now says.
Those numbers are in line with what the Bank of Canada is expecting. In January, the central bank forecasted 1.4 per cent growth this year, and 2.4 per cent next year. The central bank will release its latest projections in its quarterly Monetary Policy Report on Wednesday.
Continued cheap oil prices and weaker demand for other commodities were cited as factors, but the IMF added other trade barriers and slower global trade overall to its expectations.
The downgrade comes as a bit of a surprise after two closely watched economic indicators — monthly GDP and jobs numbers — both posted huge numbers in recent weeks, with the economy having its best month in more than two years in January.
Global growth slowing, too
Canada isn't the only economy the IMF has a gloomier outlook on, however.
The IMF is also lowering its estimates for the United States and the global economy overall.
China was a rare bright spot, with the IMF upping its forecast for growth to 6.5 per cent this year and 6.2 per cent in 2017. Each figure is 0.2 percentage points higher compared to what the group was saying in January.
The international body repeated a recent warning that the world's economic growth remains too slow and too fragile, increasing the risk of social and political stress in many countries.
The revised outlook is being released as the IMF begins its spring meetings in Washington, D.C. Finance ministers and central bank governors from the G20 countries are also scheduled to hold meetings alongside the IMF.