IMF slashes Canada's GDP growth for 2009 and 2010

The global economy will stop growing in 2009 and drag Canada's financial fortunes down for the next two years, the International Monetary Fund said Wednesday.

In its latest economic update, the Washington-based international finance institution said the global economy will barely expand at all — growing a mere 0.5 per cent in 2009, the lowest rate in 60 years.

The world's GDP will begin to expand faster in the next 12 months, growing by three per cent in 2010, the group said.

"We now expect the global economy to come to a virtual halt," said IMF Chief Economist Olivier Blanchard in prepared remarks for a press briefing.

But even as the IMF cut the global forecast, it utterly slashed Canada's outlook.

The organization now believes this country will shrink in 2009 and will only grow half as much in 2010 as the IMF originally expected.

The IMF said Canada's economy will contract by 1.2 per cent in 2009 and will expand by 1.6 per cent in 2010.

Back in November, the IMF predicted Canada's GDP would grow by 0.3 per cent this year and three per cent in the ensuing 12 months.

Even with the weaker forecast, Canada is expected to outperform the U.S. economy in 2009 and 2010. The international think tank forecast that the United States will shrink by 1.6 per cent this year and grow by only 1.6 per cent in 2010.

Still, one day after Canada's Finance Minister Jim Flaherty tabled a deficit-heavy budget with a promise to get the country into a surplus position within five years, the IMF report presented a problem.

Ottawa is predicating its fiscal plans on national GDP contracting by 0.8 per cent in 2009 and growing by 2.4 per cent in 2010.

But, the IMF's figures have Canada's national income contracting in 2009 50 per cent faster than the government's numbers and expanding 33 per cent slower in the next year than the federal Department of Finance.

The IMF's report would appear to be a bigger problem for the Bank of Canada, which recently predicted the country's growth rate at 3.8 per cent for 2010, much higher than the new forecast.