The chief of the International Monetary Fund (IMF) stated that Canada holds a favorable fiscal position compared to other G7 nations, even as the Liberal government plans to increase its deficit this year. During a press briefing at the IMF’s annual meeting in Washington, IMF Managing Director Kristalina Georgieva addressed the fiscal conditions of advanced economies globally.
Georgieva highlighted that while some G7 countries face significant fiscal challenges, others, such as Germany and Canada, are in a stronger position. She encouraged Canada to leverage its fiscal flexibility to stimulate growth, particularly in key sectors like housing, infrastructure, and energy, to enhance productivity.
In a recent report, the IMF projected a slowdown in global growth from 3.3% in 2024 to 3.1% in 2026, citing factors such as prolonged uncertainty, protectionism, and labor supply shocks as potential hindrances to growth. Canada’s growth is expected to decelerate to 1.2% this year due in part to the impact of tariffs imposed by U.S. President Donald Trump.
As the Liberal government prepares to unveil its budget on November 4 under Prime Minister Mark Carney, there is a focus on prioritizing “nation-building projects” in response to trade challenges. Carney has also committed to meeting the NATO defense spending target by 2026, signaling a larger deficit compared to the previous year.
The Parliamentary Budget Officer (PBO) forecasted an annual deficit of $68.5 billion for Canada this year, up from $51.7 billion in the previous year. However, interim PBO Jason Jacques raised concerns about the sustainability of Canada’s finances, contrasting with former PBO Kevin Page’s perspective that Canada remains in a relatively strong fiscal position within the G7.
The Liberal government announced a shift in budget presentation, with all future budgets to be delivered in the fall instead of the spring. This change includes separating operational spending from capital investments and aiming to balance operational expenses within three years. While there are differing views on the broad definition of capital investment, the IMF’s Georgieva expressed support for Canada’s new budgetary framework, deeming it a positive change.
Overall, Georgieva’s remarks underscore Canada’s fiscal strengths within the G7 and the importance of strategic fiscal management to navigate global economic challenges effectively.
