IMF expects Canada's economy to expand by 1.9% this year

The International Monetary Fund is projecting strengthening world growth in 2017 and has upgraded its estimates of Canada's economic potential.

However the Washington-based agency says any moves by the incoming Donald Trump administration to restrict trade could dampen the improving outlook.

In its report released Monday, the IMF says it estimates the Canadian economy will grow by 1.9 per cent in 2017 and 2.0 per cent in 2018. That compares with its previous estimate of 1.9 per cent growth in both years.

Canada is expected to have the second-fastest growth among the G7, ahead of the four European members and Japan.

The U.S. is also expected to power ahead with its economy expanding by 2.3 per cent this year and 2.5 per cent next year, helped in part by government spending.

"Markets have noted that the White House and Congress are in the hands of the same party for the first time in six years, and that change points to lower tax rates and possibly higher infrastructure and defence spending," Maurice Obstfeld, IMF research department director, said in prepared remarks this morning.

He predicts a swifter pace of interest-rate increases by the U.S. Federal Reserve as a result of this increased pace of U.S. growth.

Emerging market and low-income economies that did poorly in the first half of 2016 because of low commodity prices are also showing signs of recovery and will improve in 2017, the IMF said.

Global growth will rise to a rate of 3.4 per cent in 2017 and 3.6 per cent in 2018, from a 2016 rate of 3.1 per cent, it predicted.

However, there is potential instability from sharp exchange movements, primarily from the strong U.S. dollar, and from what the IMF called "protectionist pressures."

There is also danger in Europe and emerging economies from "inadequate progress on reforms to bank balance sheets," it said.