Canada ‘tilting to the downside’

Canadian economic growth will slow drastically this year, claims the IMF…

A recent International Monetary Fund report predicts that the economy will plummet to 1.8%, with a risk of an even sharper downturn as weakness in the U.S. economy spreads beyond the housing sector.

After growing about 2.5% in 2007, Canada's healthy economy and fiscal standing will help it withstand the global turbulence but external risks will pose a challenge.

Canadian dollar 'overvalued'?

A spokesperson for the IMF stated: "The balance of risks to growth is tilted to the downside. With U.S. weakness through the third quarter (of 2007) primarily reflecting a housing downturn, spillovers have continued to be limited. As the U.S. slowdown broadens to consumption, it is likely to generate more general trade effects."

The spokesperson added: ‘The Canadian dollar at near parity with the U.S. dollar was an appropriate market value, reflecting the strong economy and high commodity prices. Some measures suggest it is slightly overvalued. Canada's adjustment to the currency's rise against the U.S. dollar has been remarkably smooth due to a flexible labour market”.