Canada's economy will catch a chill from the slowdown in the United States this year, but should rebound moderately in 2009, the International Monetary Fund said Wednesday.
The IMF said Canada's GDP would grow by 1.3 per cent this year, well below last year's 2.7-per-cent increase. The prospects for 2009 are rosier, with the IMF forecasting growth of 1.9 per cent.
It's the IMF's second downward revision this year in the Canadian outlook. In February, it lowered its 2008 GDP growth forecast to 1.8 per cent from 2.3 per cent.
The U.S. economy will likely experience a "mild recession" this year and will manage only a slight recovery in 2009, the IMF said in its World Economic Outlook.
The IMF said growth in the U.S. would be just 0.5 per cent in 2008 — a full percentage point lower than an interim forecast the IMF issued just three months ago. Growth will edge up to just 0.6 per cent in 2009, it said.
The IMF blames deepening fallout from the U.S. housing correction and "a financial crisis that has quickly spread from the U.S. subprime sector to core parts of the financial system."
The outlook fingers the unfolding financial market turmoil as the "biggest downside risk" to the global economy. On Tuesday, the IMF warned that the U.S. mortgage and credit crises could cause almost $1 trillion US in financial losses.
Global economic growth will slow to 3.7 per cent this year, with the slowdown most apparent in developed economies, the IMF forecast. But it said emerging economies will also feel some pain.
China's 11-per-cent growth in each of the past two years will slow to 9.3 per cent this year, the forecast says. India's economic growth will ease to 7.9 per cent in 2008 from 9.2 per cent last year.
The IMF also says there's a 25-per-cent chance of a global recession in 2008 and 2009.