Canada and the IMF

TORONTO—Canada's "much-needed" shift to growth led by exports and business spending rather than the consumer sector hasn't yet fully materialized, the International Monetary Fund said in its world economic outlook report Tuesday.

The IMF said it expects gross domestic product growth in Canada to rise to 2.3% this year from 2% in 2013, up slightly from the 2.25% it forecast for 2014 in its last report on Canada in February. It sees growth of 2.4% in 2015.

The pickup in the U.S. economy the IMF expects this year will boost Canada's export and business investment growth, it said. It expects growth in the U.S., Canada's principal trading partner, to rise to 2.8% this year from 1.9% in 2013.

"Although external demand could surprise on the upside, downside risks to the outlook still dominate, including from weaker-than-expected exports resulting from competitiveness challenges, lower commodity prices, and a more abrupt unwinding of domestic imbalances," the IMF said.

Canadian policy makers are counting on increases in exports and in investment by businesses to take over from consumers as the main drivers in growth, because of near-record levels of debt among Canadian households and record-high housing prices.

Some economists believe a sharp, destabilizing correction in the housing sector is still a real possibility in Canada.

While the Bank of Canada has said the household debt situation has improved, the IMF said it remains a key concern.

"Indeed, despite the recent moderation in the housing market, elevated household leverage and house prices remain a key vulnerability," it said.

It said the Bank of Canada should continue to keep interest rates low to underpin growth.

"With inflation low and downside risks looming, monetary policy should remain accommodative until growth gains further traction," the IMF said.

The Bank of Canada is expected to keep its key interest rate at 1% at its policy announcement on April 16, and many believe it will maintain its current neutral stance.

The IMF also urged Canadian governments—particularly the federal government—to recognize that growth may need continued support.

"Fiscal policy needs to strike the right balance between supporting growth and rebuilding fiscal buffers, especially at the federal government level, with less room to maneuver at the provincial level," the IMF said.

aawwww....Cappo worried about the canadian economy!
he must have a lot of money invested in canada! :-\

seriously though.......i will never understand how peeps get themselves so deep in debt.....obviously they spend a lot more than they earn!!

i have always avoided being debt except for the mortgage which was like an albatross around my neck.  all i wanted to do was pay it off as fast as we possibly can.