Cana­dian econ­omy to see ‘muted growth’ in 2011: IMF

The Pak Banker - - Company & Boss News -

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

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