Canada – Mark Carney’s election win
Mark Carney’s election win will change the direction of the global trade war, according to Faisal Islam’s interview with him for the BBC. https://www.bbc.co.uk/news/articles/cgjlqwxevd0o
Let’s hope he is right. King Charles III will open the new session of the Canadian parliament on Tuesday 27th May. Shortly afterwards, Canada will host the G7 Summit in June, just before the 90-day pause on US reciprocal tariffs with the rest of the world is due to end.
Canada is the smallest of the G7 economies (in terms of GDP at market exchange rates) although it is prosperous (third in terms of GDP per head at market rates) and the economy has been well run. Notably, it avoided the global financial crisis of 2008/9. Mark Carney,. Governor of the Bank of Canada at that time, must take a lot of the credit.
The population is expected to continue to grow over the next 25 years, with inward migration and support for families with young children a key element of Canadian policy in recent years. Inflation is close to the 2% midpoint of the Bank of Canada's 1-3% target range and is expected to remain so in 2025 and 2026, according to the IMF's latest forecasts. GDP growth turned out stronger than generally expected in the final quarter of 2024 and third quarter growth was also revised up. Growth of around 1.5% per year is expected in 2025 and 2026.
The policy interest rate (2.75%) and broad money growth (6.4% year-on-year) are both about right in our view.
Fiscal policy is also on a good footing. The overall fiscal deficit is small (expected to be less than 2% of GDP this year and trending lower over the next five years). Although the accumulated stock of government debt is high (113% of GDP) it is expected to gradually edge lower.
There are vulnerabilities. Private sector credit is at a high level, although it has eased recently. And carbon emissions are high (15 tonnes per head, similar to the US level) and are not on track to reach net zero in 2050. Mark Carney is well positioned, from his work in this area, to tackle that problem.