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Brace for sharp slump, IMF warns Canada

by investor on 11/03/09 at 12:27 pm

Canada’s economy will likely contract rapidly in the next few months, putting pressure on bank credit, especially in the West, the International Monetary Fund warns in its latest report card on Canada.

In a thorough assessment of how the country’s policy makers and financial institutions are handling the global financial crisis, the IMF gives the federal government and the Bank of Canada glowing reviews.

But it also warns of dangers ahead, and tells policy makers not to rest on their laurels.

“Be watchful and prepared to respond as necessary,” said Charles Kramer, division chief of the IMF’s Western Hemisphere Department and mission chief for Canada.

He said the IMF is in the midst of lowering its forecast for Canada’s output in 2009. The official projection, for now, is for a contraction of 1.2 per cent, but that will come down as the IMF takes into account the deep contractions taking place in Canada’s main trading partners.

“Looking ahead, output is likely to contract significantly in the near term, recovering as the full effects of policy stimulus are felt,” the IMF’s concluding statement says.

On Tuesday, Prime Minister Stephen Harper used his first major speech on the economy to pump up Canada’s prospects, claiming Canada will emerge faster than other countries from the global recession. But Mr. Kramer said it’s impossible to say right now whether Canada’s recovery will be faster than elsewhere.

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