07/24/2014 04:21 EDT | Updated 09/23/2014 05:59 EDT

IMF downgrades Canada's 2014 growth to 2.2%, 2nd best in G7

The International Monetary Fund has downgraded its economic outlook for Canada, saying the economy will grow just 2.2 per cent in 2014 and 2.4 per cent in 2015.

It’s somewhat gloomier outlook puts it in line with the Bank of Canada, which has said the slow start to the year because of a bitter winter and weakness in China will mean less economic activity in Canada.

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The Canadian dollar fell on the news, trading 0.19 of a cent lower at 93.02 cents US on Thursday afternoon.

The IMF also forecasts slower growth in the rest of the world, saying the world economy will grow at 3.4 per cent in 2014, picking up to four per cent in 2015. That’s less than the 3.7 per cent it had anticipated for this year.

Global downgrade

“The recovery continues, but it remains a weak recovery, indeed a bit weaker than we forecast in April." the IMF's chief economist Olivier Blanchard said in unveiling the report in Washington, D.C. on Thursday.

The cold winter meant the U.S. economy slipped backwards, leading the IMF to downgrade its annual forecast for the U.S. to 1.7 per cent in 2014.

The stall in the U.S. economy earlier this year, and reduced demand from China also are cutting into global growth, the IMF said.

“Some of the demand weakness in the first quarter appears to be more persistent, especially in investment globally, and is expected to result in lower global growth in 2014," it said.

Despite the downgrade, Canada is second among the G7 for the strength of its outlook.

Britain pulls ahead

The surprise leader is Britain, which has pulled ahead in both wage growth and employment in the last few months and seen an uptick in inflation. The IMF outlook for the U.K. was revised upwards to 3.2 per cent from 2.8 per cent growth.  

The IMF underscored that although the global economy recovery is proceeding, trouble spots such as in the Ukraine and the Middle East are a downside risk, especially if tensions there affect oil and natural gas prices.

It downgraded its outlook for Russia, which is expected to grow just 0.2 per cent.