IMF: Canada has weakest economy of 20 countries outside Europe
The International Monetary Fund warns Canada’s economy is not the superstar economy the Harper government praises it to be. The IMF goes further to say that of 20 countries outside Europe, Canada will have the slowest rate of growth in 2013 and will cease to be the engine of growth among the G7. They link the slow down to Conservative economic policies. Forget the hype, Canada’s Economic Action Plan was nothing but an ad campaign.
The IMF’s World Economic Outlook report, released Tuesday, pit Canada’s growth forecast for 2013 at 1.5%, down from its October estimate of 2%. Meanwhile, Japan and the United States are moving along, with growth rates of 1.6% and 1.9% respectively, despite a sluggish rate of 0.3% for Europe.
The IMF said Canada’s economy is expanding at the slowest pace since 2009, one year after the start of the 2008 economic downturn. The housing boom at the time helped keep Canada’s economy from venturing deeper into the recession but high levels of household-debt constrained demand. The IMF advises the Harper government to prepare growth-supporting measures to counter a continued weakening trend since they’ve chosen to cut spending and stem increases in household borrowing. They suggested maintaining steady deficits and freezing the Bank of Canada’s interest rate at 1%.
“The main challenge for Canada’s policy-makers is to support growth in the short term while reducing the vulnerabilities that may arise from external shocks and domestic imbalances,” the body advises.
“Although fiscal consolidation is needed to rebuild fiscal space against future shocks, there is room to allow automatic stabilizers to operate fully if growth were to weaken further.”
In addition to this bleak outlook, the IMF predicts the trend will continue for the next two years, with stagnant unemployment rates at 7.2% and a significant deficit. To make matters worse, several countries will outperform Canada, contrary to Conservative economic messaging.
Canada is expected to under-perform the United States for the next 2 years and countries outside the G7 like the Scandinavian nations, Australia and New Zealand.
While the IMF says a stronger US will help Canada, getting Canadians to overcome household-debt must be a priority. While the Harper Government has addressed that, reforming mortgage rules and giving Canadian jobs to temporary foreign workers will counter-act any stability they hope to find. Rather than focus on debt repayment, cash-strapped Canadians will continue to dig themselves deeper into debt to make ends meet, thus shifting the burden of debt elsewhere and creating future economic troubles. By forcefully lowering the standard of living of Canadians to adhere to market pressures, other parts of the market will be negatively impacted leading to further economic slowdown.
What do you think of the IMF report and how the Harper government has dealt with the economy?