Canada is in a better position than most countries to weather the global financial crisis, according to the International Monetary Fund’s (IMF) annual review of Canada’s economic developments and policies.

In its report released Friday, the IMF commends the federal government’s fiscal stimulus package as “as timely, appropriately sized, diversified, and well structured.”

Further, the report notes that the plan takes “steps to facilitate labour reallocation and protect the vulnerable.”

The report also notes that total federal and provincial fiscal stimulus undertaken in Canada is among the largest of any G20 economy, but that country is “well-positioned” to provide additional stimulus if necessary.

“Given Canada’s strong fiscal position –- with the lowest debt-to-GDP ratio among G7 countries — and the authorities’ commitment to medium-term structural surpluses, further fiscal expansion would not put at risk debt sustainability.”

“I am pleased to see the IMF’s favourable report on Canada’s Economic Action Plan,” said Finance Minister Jim Minister Flaherty.

The report notes that the global economic slowdown and financial market turmoil have hurt growth in Canada, with the U.S. downturn and weaker commodity prices weighing on gross domestic product.

“The near-term economic outlook will be challenging in light of the sharp deterioration in the global environment and Canada’s strong international linkages,” the IMF said.

Real GDP contracted by 3.4% in the fourth quarter of 2008 after a weak performance earlier in the year. The economy contracted further in early 2009, but is expected to rebound moderately later in the year boosted by fiscal and monetary stimulus.

The IMF repeated its earlier forecasts, which see the Canadian economy shrinking 2.5% in 2009, with GDP growth expected to rise to 1.2% in 2010. The country’s unemployment rate was forecast at 8.4% in 2009 and rising to 8.8% next year.

“Canada is better placed to come out of the current economic crisis on a much stronger footing than many other countries,” said Flaherty.

The IMF report also commends the role that strong supervision and regulation has played in the ongoing stability of the Canadian financial system amid global turbulence, while supporting the proactive steps that the Government has taken to further strengthen markets.

The report notes resilience of Canada’s banks relative to their international peers, observing that no Canadian bank has required public capital injections or guarantees. “Rigorous limits on leverage, robust regulatory capital ratios, effective supervision, and smooth cooperation across regulatory agencies have underpinned financial stability.”

The IMF reviews the economic developments and policies of each member country, usually on an annual basis. The IMF’s report is released at the discretion of the country being reviewed.

IE