Canadian economy to see ‘muted growth’ in 2011: IMF
TORONTO: While Canada has weathered the stormy economic recession fairly well, there are still plenty of risks, including high levels of household debt and anticipated health-care spending issues, the International Monetary Fund (IMF) warned in a report.
In the report, the IMF said the Canadian economy will see "muted growth" next year.
"Household debt has run up to high levels, housing markets are cooling and fiscal stimulus is waning. Risks are tilted to the downside, with a key risk that the global recovery stalls," the report said. "In the absence of a double-dip recession in the United States and/or a new rapid deterioration of global financial conditions from renewed sovereign credit strains, Canada should enjoy a comfortable, if not exuberant, rate of growth in the near term."
The IMF supports the federal government's plan to balance its budget over the medium term, especially in light of concerns about the budgetary impact Canada's aging population will have on health-care spending. The IMF also called on the provinces to be more open and transparent about the issue.
"Restraint in health-care spending will be an essential ingredient in fiscal stability," the report said.
"Left unchecked, growth in health-care spending would put increasing and unsustainable pressure on the fiscal positions of Canada's governments."
Finance Minister Jim Flaherty welcomed the IMF's comments. "The report provides strong support for our plan to return to budgetary balance and commends the recent decision to extend the deadline on some infrastructure proj- ects," Flaherty said in a statement. "I also welcome the IMF's strong endorsement of the government's policies to promote Canada's long-term growth prospects, notably infrastructure spending, corporate income-tax cuts and progress toward implementation of a Canadian securities regulator."
Charles Kramer, the IMF's mission chief to Canada, expects Canada's economy to grow three per cent in 2010 and 2.25 per cent in 2011.
"The expansion is maturing so we expect some slowdown. We don't see it necessary to respond (with more stimulus) now," he said. "What we'd need to see is a substantial deterioration in the outlook, but we don't expect that now." If the economy demands it, Canada's central bank has room to manoeuvre, with interest rates at one per cent. -PB News