IMF boosts Canadian growth forecast

The International Monetary Fund lifted its forecast for Canada's economic growth Tuesday, saying it will likely expand 2.6 per cent in 2010.

Its previous forecast was 2.1 per cent growth this year. The Canadian economy will expand 3.6 per cent in 2011, the IMF said in an update to its world economic outlook.

The global economic recovery is stronger than the IMF had expected as global trade stabilizes and commodity prices climb. It boosted its outlook for global output to 3.9 per cent this year from its October prediction of 3.1 per cent....

“In most advanced economies, the recovery is expected to remain sluggish by past standards, whereas in many emerging and developing economies, activity is expected to be relatively vigorous, largely driven by buoyant internal demand.”

The latest IMF prediction is still lower than the Bank of Canada's projection for this year. The central bank said last week it expects the economy will grow 2.9 per cent this year and 3.5 per cent next year, after an estimated 2.5-per-cent contraction in 2009.

Washington-based IMF didn't elaborate on why it raised its Canadian forecast. But more clues on the state of the economy will come Friday, with the release of Statistics Canada's gross domestic product for November. Economists polled by Bloomberg expect the economy grew 0.3 per cent in the month.

Other economists are also growing more optimistic. National Bank Financial chief economist Yanick Desnoyers boosted his forecast Tuesday. He now sees the Canadian economy expanding 3.1 per cent, up from his earlier forecast of 2.9 per cent as the labour market recovers at a faster clip than he'd expected.

“Canada is well ahead of the U.S. in the recovery of its labour market,” he said, adding that employment in services is now at a record, while average wages rose 3.5-per-cent annualized in the fourth quarter, the second straight quarter of “highly respectable” growth.

Access to business credit is improving, and the housing market remains strong, he added.