Deputy Prime Minister welcomes International Monetary Fund’s positive review of Canadian economy (2024)

IMF endorses Budget 2024’s plan for tax fairness

June 11, 2024 – Ottawa, Ontario – Department of Finance Canada

Today, the Honourable Chrystia Freeland, Deputy Prime Minister and Minister of Finance, welcomed the International Monetary Fund (IMF)’s Staff Concluding Statement of the 2024 Article IV Mission. Today’s statement highlights the federal government’s ambitious housing plan and Canada’s strong fiscal credibility, G7-leading deficit reduction, and economic resiliency.

The IMF supports the government’s plan to deliver fairness for every generation, noting the “critical importance” of advancing “structural policies, including on child care, productivity, and climate mitigation.”

Budget 2024’s changes to increase tax fairness were welcomed by the IMF, which found that increasing the inclusion rate from one-half to two-thirds on capital gains above $250,000 per year for individuals, “improves the tax system’s neutrality with respect to different forms of capital income and is likely to have no significant impact on investment or productivity growth.”

The IMF commended the federal government’s ambitious housing plan which is “expected to produce results over time” and encourages the federal government to “continue to use the power of the purse to incentivize municipal governments to facilitate more construction.” The federal government is calling on provinces to take bolder housing action—a point the IMF echoed in its report, along with urging municipalities to “reduce red tape, rezone for densification, and utilize public lands.”

On fiscal responsibility, the IMF affirmed that “Canada’s fiscal track record continues to compare favourably to many other advanced economies—it was quick to consolidate after the pandemic, has maintained relatively low deficits since then, and is targeting further deficit reduction.” The IMF also credited the government for adhering to quantitative fiscal objectives introduced in the 2023 Fall Economic Statement, which complement the government’s fiscal anchor to reduce the federal debt-to-GDP ratio over the medium-term, which was also maintained in Budget 2024.

Regarding Canada’s economic performance, the IMF noted the Canadian economy “appears to have achieved a soft landing” after avoiding a recession that many economists predicted, while also seeing inflation fall back to within the Bank of Canada’s target range. In its latest projections, the IMF revised up Canada’s real GDP growth for both 2024 (1.3 per cent) and 2025 (2.4 per cent), with 2024 growth expectations supported by declining interest rates, population growth, and the expansion of the Trans Mountain pipeline. As outlined in its April World Economic Outlook, the IMF expects Canada to have the strongest GDP growth in the G7 next year. To unlock Canada’s full economic potential, the IMF notes “efforts will be required to address interprovincial trade barriers”—work the federal government has been leading, in partnership with provincial and territorial governments.

The IMF indicated the government’s Canada-wide affordable early learning and child care program “is likely to deliver an appreciable boost to [female labour force] participation”, and calls for further efforts to “train and retain more early childhood educators and to build more (child care) centres”—action which the government is delivering through Budget 2024. Affordable child care has already helped to enable Canada’s labour force participation rate for women in their prime working years to reach a record high of 85.7 per cent last fall, compared to just 78.0 per cent currently in the United States.

The IMF also praised carbon pricing as being “of essential importance in delivering on Canada’s commitment to reduce 2005 emissions by 40-45 per cent by 2030,” and noted that greater coordination between climate policies among different orders of government would help accelerate emissions reductions. The federal government welcomes this call on the provinces and territories that could do more to reduce their emissions to step-up their climate action.