The October World Economic Outlook sees a rebound to 1.7% in 2027, but with inflation near 3% the Bank of Canada has little room to help.

The International Monetary Fund's October World Economic Outlook, released October 13, projects that Canada's economy will grow just 1.1% in 2026, down from 1.9% in 2025 and 0.4 percentage points below the Fund's April forecast. The figure is unchanged from the IMF's July update, so the report mostly confirms a downgrade already on the books. But it confirms it at a moment when Canada's labour market is weakening and inflation is rising.

The numbers

The Fund expects growth to recover to 1.7% in 2027. Consumer price inflation is projected at 2.8% this year, up from 2.1% in 2025, before easing to 2.4% in 2027. The IMF points to an energy shock from the war in the Middle East and elevated trade uncertainty, partly offset by supportive policy and better terms of trade from higher oil prices. Globally, the Fund nudged its 2026 growth forecast up to 3.1% from 3.0% in July and sees 3.4% in 2027.

A global economy growing unevenly

IMF research director Silvana Tenreyro said global resilience is under strain, with risks tilted to the downside, and described the outlook as highly uneven. Thirty-two economies now account for 95% of global growth, down from 54 in April, according to the report. Growth is being propped up by AI-related investment, but the payoff is uneven, and the Fund flagged rising public debt and higher borrowing costs in several advanced economies as heightening fiscal concerns. It also warned of growing risks from rising debt more broadly, including the financial exuberance around AI.

How it lines up with what's happening in Canada

The 1.1% figure matches the private-sector consensus the federal government cited in its spring economic update, so the IMF is not an outlier. What has changed since then is the mix. Canada lost about 110,000 jobs over August and September, a Bank of Canada survey found hiring intentions subdued, and employers have signalled smaller base salary increases for 2026. At the same time, inflation held at 3.0% in July and August, and Governor Tiff Macklem said this weekend that the Bank will raise its inflation forecast significantly when it releases new projections on October 28.

What businesses should take from it

A forecast like this is a planning assumption, not a prediction. Soft growth with sticky inflation means demand is unlikely to bail out businesses carrying rising costs, and it leaves the Bank of Canada little room to cut even though the economy is weak. The 2027 rebound to 1.7% rests on conditions nobody controls, including a calmer Middle East, a settlement in the trade dispute and steadier financing conditions. The IMF's own framing is that the risks remain tilted to the downside, which is a reasonable reason to keep some slack in 2027 budgets rather than assume the recovery arrives on schedule.