Question Period Note: IMF WORLD ECONOMIC OUTLOOK (WEO) – April 2026

• The IMF has released its April 2026 World Economic Outlook (WEO) on April 14, projecting global growth to moderate in 2026 compared to 2025.
• The Middle East conflict is expected to weigh on growth and put upward pressures on headline inflation on the back of higher energy prices. The reference forecast assumes that the conflict will have limited duration, intensity, and scope; such that the disruptions will start fading as of mid-2026, consistent with commodity futures prices as of March 10.

• The evolving conflict in the Middle East will test the resilience of the global economy. Energy prices have increased as the global supply of energy has been disrupted. This adds markedly to cost pressures, with global growth expected to slow.
• Canada is not immune to these headwinds. Still, the IMF expects Canada to have the second strongest growth in the G7 this year and next year (after the U.S.).
• Canada is expected to maintain the strongest fiscal position in the G7 in 2025 and throughout the forecast horizon, with by far the lowest net-debt-to-GDP ratio.

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• Global Outlook: The global economic outlook is being challenged by the conflict in the Middle East. Global growth is projected to slow from 3.4% in 2025 to 3.1% in 2026 (down 0.2 p.p. from the January 2026 WEO Update) and 3.2% in 2027 (unchanged). Absent the conflict, the 2026 growth would have been projected at 3.4%. Global inflation is projected to pause its decline, with headline inflation increasing from 4.1% in 2025 to 4.4% in 2026 – a 0.6 percentage point upward revision from the January 2026 WEO, reflecting higher energy and food prices.
• Regional Outlook: Conflict impacts are uneven, with emerging markets and developing economies more affected than advanced economies. Advanced economies are expected to grow 1.8% in 2026 (unchanged from January) and 1.7% 2027 (unchanged), with U.S. real GDP growth accelerating to 2.3% in 2026 (down 0.1 p.p.) from 2.1% in 2025 before slowing to 2.1% in 2027 (up 0.1 p.p.). Growth in the euro area is expected to slow from 1.4% in 2025 to 1.1% in 2026 and 1.2% in 2027(down 0.2 p.p. both years respectively from January update). Real GDP growth in China is expected to slow from 5.0% in 2025 to 4.4% in 2026 (down 0.1 p.p.) and 4.0% in 2026 (unchanged).
• Canadian Economic Outlook: The IMF expects real GDP growth in Canada to slow from 1.7% in 2025 to 1.5% in 2026 (-0.1 p.p. from January) and then to pick-up to 1.9% in 2027 (unchanged). Still, the IMF outlook for 2026 remains higher than the Budget 2025 forecast (1.2%) but it is slightly lower than the 2.0% growth rate projected in Budget 2025 for next year. The IMF expects the Canadian economy to see the second fastest rate of growth among the G7 this year and next year (after the U.S.).
• Canadian Fiscal Outlook: Canada’s fiscal position remains one of the strongest in the G7. The general government deficit is projected to widen to 2.7% of GDP in 2026 but then decline steadily to 1.5% in 2031—keeping Canada ranked first or second in the G7 throughout the forecast period. Net debt remains the lowest in the G7 by a wide margin over the entire forecast horizon. After reaching a post-pandemic trough of 10.2% of GDP in 2025, it is expected to rise only modestly in the near term before easing thereafter.
• Risks: The IMF sees downside risks to growth as dominating the outlook. Geopolitical tensions could intensify, worsening energy crisis. A re-evaluation of AI profit expectations could lead to a decline in investment and trigger an abrupt correction in financial markets. Larger fiscal deficits and increasing public debt could put pressure on long-term interest rates and, in turn, on broader financial conditions.
• Policy Recommendations: Central banks should guard against prolonged supply shocks destabilizing medium-to-long-term inflation expectations. The IMF recommends that members implement structural reforms to promote financial stability in the face of the current crisis, while also enhancing resilience. Where fiscal support is deemed necessary to protect vulnerable groups, members are urged to fund it within current budget envelopes by reprioritizing spending.