The International Monetary Fund has downgraded its 2017 forecast for Canada along with its outlook for the wider global economy.

The Washington-based fund cited the ongoing challenges from China’s slowing growth, plunging oil prices and a rising U.S. dollar.

Canada will grow just 1.7 per cent in 2016 and 2.1 per cent in 2017, the IMF predicted in its World Economic Outlook update on Tuesday.

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“I think the year coming is going to be a year of great challenge,” IMF economic counsellor Maury Obstfeld said, referring to the global outlook.

The IMF downgraded its forecast for by 0.2 percentage points to 3.4 per cent in 2016 and 3.6 per cent in 2017, saying the slowdown was widespread across both the advanced and emerging economies.

The latest downgrade is due to a deeper than expected recession in Brazil, the impact of low oil prices on leading Middle East producer Saudi Arabia, and slower than expected U.S. growth, the IMF said.

For Canada, the 2016 forecast is unchanged, but the outlook for 2017 is down 0.3 percentage points since the IMF’s last prediction, in October.

That’s the same level of growth Canada is expected to show for 2015, once all the year-end data has been reported, the IMF said.

Like other oil exporting nations, Canada is feeling the pain of a 70-per-cent plunge in the world price of crude oil from $100 a barrel just 20 months ago.

With Iranian oil now coming online, the IMF sees a “low for long scenario for oil,” Obstfeld said a video on the IMF website. “Perhaps not at the current very depressed levels of below $35 a barrel … but it’s hard to see oil going back to the $100 barrel level anytime soon.”

The IMF’s worsening outlook comes a day ahead of the Bank of Canada’s rate-setting decision, with many calling on Governor Stephen Poloz to postpone a rate cut that could undermine consumer confidence.

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The North American benchmark for oil slipped to $28.36 U.S. on Monday, down $1.06 U.S. on the day on concerns Iranian oil will exacerbate a global glut of crude.

The Canadian dollar, closely tied to oil’s performance, slipped .17 of a U.S. cent to $68.70 cents U.S. Both are near 13-year lows.

The Toronto Stock Exchange benchmark index posted a triple-digit loss, ending the day down 131.29 points at 11,942.17, and is now down almost 23 per cent from its all-time high in September 2014.

Markets around the globe have been “spooked” by uncertainty about China’s slowing growth rate, Obstfeld observed.

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American markets were closed for Martin Luther King Day.

The U.S. is still expected to show “pretty strong” growth, but “we’re not as optimistic about a pickup in U.S. growth as we were in October,” Obstfeld said.

The IMF lowered its forecast for U.S. growth to 2.6 per cent in each of 2016 and 2017, down 0.2 percentage points from its outlook three months ago.

The U.S. economy is being challenged by the rapid rise in its dollar, which is making its exports less competitive and causing its manufacturing sector to shrink “marginally,” Obstfeld said.

Countries that can afford to invest in infrastructure to offset the slowdown should do so, he said.

“It’s hard to see why, with very, very low real interest rates, infrastructure spending where it’s badly needed is not a very good deal,” Obstfeld said.

His remarks come as private sector economists urge Canada’s federal government to pull forward some of its planned investments in social housing, transit and other major projects in its first budget, expected in late March.

The Liberal government under Prime Minister Justin Trudeau was elected on a promise to add $60 billion to Ottawa’s infrastructure spending plans over the next decade.

The world’s emerging economies, which account for half of all global activity and 70 per cent of global growth, will see their growth rate shrink for the fifth year in a row, the IMF predicted.

Projected growth for the emerging economies was revised downward by 0.2 percentage points to 4 per cent in 2015, its lowest level since the financial crisis of 2008-09, and 4.5 per cent in 2016.

The improvement in 2016 is predicated on the most economically distressed economies of Brazil, Russia and some Middle Eastern nations seeing an improvement, the IMF said, though they remain a downside risk.