On Oct. 14, the International Monetary Fund (IMF)’s World Economic Outlook (WEO) reported that global growth is stabilising, with inflation easing but remaining uneven while risking a downward economic spiral. The WEO emphasizes the need for credible monetary policy, fiscal consolidation and structural reforms to sustain resilience and restore confidence in the global economy.
The report notes that global growth has been “better than feared,” forecasting global GDP growth of 3.2 per cent in 2025 and 3.1 per cent in 2026. Yet, it remains well below pre-pandemic averages, which were around 3.7 to 4 per cent.
Advanced economies are expected to expand by roughly 1.5 per cent, while emerging markets and developing economies will average just over 4 per cent. Inflation continues to decline across most economies, though the pace varies significantly. In the U.S., reports indicate that inflation remains above target, driven by resilient domestic demand and a tight labour market.
The IMF attributes the modest forecast upgrade in part to the short-term resilience of trade and consumption ahead of tariff changes and supply-chain adjustments. However, the Fund cautions that the improvement is temporary and that the global economy continues to face “significant downside risks,” including renewed protectionism, fiscal vulnerabilities and fragile financial markets. IMF Managing Director Kristalina Georgieva warned that uncertainty is the new normal, emphasizing that policy volatility and structural shifts in trade patterns are likely to persist.
The WEO underscores a world economy that operates at a slow, uneven pace. Global growth near 3 per cent leaves little room for governments to respond to shocks, reducing fiscal flexibility and limiting stimulus options. The IMF’s call for countries to rebuild fiscal buffers reflects concern over elevated public debt levels and higher borrowing costs in the wake of several years of expansive fiscal policy.
Trade fragmentation remains a core risk. The Fund stresses that escalating tariffs and declining multilateral cooperation threaten to weaken investment, productivity and long-term output. Its policy guidance urges governments to pair trade diplomacy with macroeconomic adjustments to protect growth prospects. The report also highlights that emerging economies have shown improved resilience thanks to stronger policy frameworks and deeper domestic debt markets but warns that these advantages may not shield them if financial conditions tighten sharply.
Financial-market stability is another area of concern. The IMF warns that “stretched valuations” in equity and bond markets could trigger abrupt corrections, particularly if inflation surprises or interest rates remain higher for longer. In this context, the Fund recommends preserving central-bank independence, tightening fiscal discipline and advancing structural reforms to raise productivity and build resilience.
Although the IMF’s October WEO does not provide detailed country-level projections for Canada in its public summary, IMF assessments released earlier in the year show a downward revision in the country’s growth outlook. The Fund reduced Canada’s 2025 and 2026 forecasts by 0.6 and 0.4 percentage points respectively, citing slowing external demand and the lingering effects of elevated borrowing costs.
Canada’s highly open economy makes it sensitive to global trade disruptions and U.S. economic performance, both of which feature prominently among the IMF’s listed risks. Analysts note that while inflation in Canada has eased considerably, the combination of weaker exports and elevated household debt could constrain recovery momentum.
On Oct. 22, Prime Minister Mark Carney delivered a live national address announcing a strategic shift in Canada’s economic direction. Saying that the “decades-long process of an ever-closer economic relationship between the Canadian and U.S. economies is now over,” Carney announced a plan to double non-U.S. exports within a decade and to invest heavily in infrastructure, defence and trade diversification. He cited U.S. tariffs on key Canadian exports, including steel, aluminium and vehicles, as evidence that Canada must reduce its dependence on the American market.
Carney’s comments directly echo the WEO themes. The Fund’s analysis warns of global trade fragmentation and rising protectionism, identifying diversification as a central pillar of economic resilience. Carney’s commitment to expand Canadian export markets beyond the U.S. reflects this imperative. His pledge to eliminate inefficiencies in federal spending and re-establish fiscal discipline aligns with the IMF’s recommendation to rebuild fiscal buffers and maintain credibility amid a constrained policy space.
More than 75 per cent of Canadian exports are shipped to the U.S., underscoring the vulnerability that both Carney’s government and the IMF identify. His economic agenda therefore positions Canada as an example of a G7 economy directly acting on the IMF’s broader policy guidance: diversify trade, rebuild fiscal capacity and strengthen resilience against systemic external shocks.
The IMF’s WEO presents a cautiously optimistic near-term picture but warns of structural fragility and persistent downside risks. Carney’s subsequent remarks on Oct. 22 place Canada’s domestic policy squarely within that global narrative. Both the IMF and Carney highlight diversification, fiscal prudence and structural reform as central to navigating an era of slower growth and higher uncertainty.
For Canada and Ontario alike, the Carney’s policy agenda and the IMF’s global analysis both contend that the country’s economic future will depend less on the stability of its largest trading partner and more on its ability to adapt to a fragmented, unpredictable global economy.