The International Monetary Fund is advising Canada to be ready to act quickly with stimulus at the first signs of trouble in the global and domestic economies.
The IMF’s preliminary report on Canada finds the economy generally holding up well against a weak global backdrop, but notes that the risks for the future are tilted to the downside.
As it did earlier in the month, the Washington-based multination agency predicts Canada’s economy will continue to expand, but slowly.
It says growth will be about two per cent this year and next. Earlier in the month, it was more specific with projections of 2.1% in 2011 and 1.9 in 2012.
And it is mostly supportive of Canadian governments plans to reduce deficits, as well as the Bank of Canada’s low interest rate policies.
Its cautionary language is all about if the global situation, and particularly Europe, worsens.
In that case, it says Ottawa should be flexible with the unwinding of stimulus, and it notes that the Bank of Canada has room to add a monetary boost by lowering the one per cent target overnight interest rate even further.
The IMF also repeated its concern about the high level of household debt in the country and said the government may need to take further measures to cool the housing market.