The International Monetary Fund has given the federal government a passing mark for its handling of the economy since coming to power, but warns that “more difficult challenges lie ahead.”
The comments are contained in an annual report released by the Washington-based organization Thursday that credited the Trudeau government with helping the Canadian economy regain momentum.
“To support the economy, the government introduced tax cuts for the middle class, expanded family benefits, and raised infrastructure spending,” the report said. The IMF credits those measures with guiding the economy through a rough year in 2015.
Yet the IMF also raised alarm bells about the amount of uncertainty in Washington, and its potential impact on Canada’s economy over the long term.
Among the issues was whether the Trump administration would significantly cut corporate taxes, which would make Canada less attractive to investors, and the future of NAFTA.
The IMF also cited major concerns about Canada’s housing market, warning that any sudden decline in prices could send shock waves across the country.
One of the IMF’s recommendations for keeping the economy rolling was to keep interest rates low. After the report was written, but before it was released, the Bank of Canada raised its key interest rate for the first time in seven years on Wednesday, from 0.5% to 0.75%.
The report also advised the federal government to continue with its plan to invest billions more on infrastructure over the next decade, though it said the deficit should start to come down next year.
The Liberals said in their last federal budget they expect to rack up $142 billion in new debt between 2016-17 and 2021-22.
