Ottawa, March 11 2009
Archived - IMF Supports Stimulus Measures in Canada's Economic Action Plan
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The Honourable Jim Flaherty, Minister of Finance, today welcomed an International Monetary Fund (IMF) statement of support for the fiscal stimulus in Canada's Economic Action Plan, which it called "large, timely and well-targeted." Noting the stimulus package is well above the Fund's benchmark of 2 per cent of gross domestic product (GDP), the IMF statement said the immediate focus should be to implement the budget to mobilize spending.
"We will persevere through this difficult period," said Minister Flaherty. "We are Canadians. We have the resources; we are better positioned than any other country in the world to weather this storm and to come out of it stronger than ever. But first, we have to pass the stimulus measures in the budget implementation bill, so that we can help cushion the impact for Canadians."
In its concluding statement to its 2009 Article IV Mission to Canada, the IMF says: "Canada is better placed than many countries to weather the global financial turbulence and worldwide recession, thanks to sound policy management and proactive steps to maintain economic and financial stability."
The statement notes that the global deterioration has hurt Canada, which relies strongly on exports and trade, leading to a decline in GDP and rising unemployment. The IMF expects economic output to continue to contract in the near term, as exports decline and commodity prices remain soft, with recovery coming as the full effects of the stimulus in Canada's Economic Action Plan are felt.
The statement points out that strains evident in other countries, caused by overheated housing markets and economic booms, are markedly less serious in Canada, leading to less severe lending conditions. As well, Canada has responded proactively to the worsening outlook with fiscal stimulus and an aggressive easing of monetary policy by the Bank of Canada.
The IMF statement says that the infrastructure investments and permanent tax cuts in Canada's Economic Action Plan will help stimulate demand, while efforts to boost the safety net and increase training will protect the most vulnerable Canadians. The budget appropriately leverages provincial stimulus, and the IMF statement welcomes provincial intentions to launch supplementary packages. The IMF also lauds Canada's move to cut external tariffs as part of the country's commitment to openness and free trade.
While supporting Canada's fiscal stimulus package, the IMF welcomes the Government's commitment to avoid long-term structural deficits and its aim to return to a debt-reduction path.
The IMF statement also hails Canada's financial system for its remarkable stability amid the global turbulence and commends government steps to further strengthen the system.
"While no major financial system has been entirely immune from global spillovers, Canadian banks were well-capitalized coming into the downturn and have avoided the catastrophic losses experienced by banks in other major countries," the statement says.
The statement notes that consolidating and enhancing securities regulation in Canada would further strengthen its already robust financial stability framework.
The statement concludes the IMF's Article IV Mission to Canada, which will be followed by a full report later in the spring. 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. The Government supports this release in recognition of the importance of the IMF's surveillance activities, and as an expression of Canada's commitment to ensuring that these activities are transparent.
The IMF statement on Canada can be found on the IMF website at www.imf.org.
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Office of the Minister of Finance
Department of Finance
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