[Mb-civic] Canada's economy getting screwed by US failures

[Harold Sifton]

Canada likely needs more rate hikes - IMF 
Wed Apr 19, 9:25 AM ET 

WASHINGTON (Reuters) - Canada's economy will likely expand 3.1 percent this year and a closing output gap means more interest-rate rises will probably be needed to check inflation, the International Monetary Fund said on Wednesday. 

In its twice yearly snapshot of the global economy, the IMF cut its projections for Canadian gross domestic product growth in both 2006 and 2007.

The Washington-based lender said Canada's economy should grow 3.1 percent this year and 3.0 percent in 2007, both down from projections made at its September meetings.

Although Canada is in strong economic and fiscal shape, it faces risks from outside its borders.

"The Canadian economy is vulnerable to any slowdown in the United States, an abrupt depreciation of the U.S. dollar, or a worsening of the terms of trade caused by weaker global commodity prices," the fund said.

"Inflation remains well-contained but, with the output gap closing, further interest rate increases will likely be needed in the coming months," the IMF said.

The Bank of Canada raised its key overnight rate to 3.75 percent last month in a tightening cycle that began last September.

"The new government has some fiscal room to maneuver in achieving its objective of lowering the tax burden and slowing spending growth, while maintaining fiscal surpluses and keeping government debt on a firm downward path," the fund said.

Prime Minister Stephen Harper was elected January 23, ending nearly 13 years of Liberal Party rule.

"Rising health care costs present a long-term challenge to fiscal sustainability, and reforms to the public health system will be needed to contain costs," the fund said of the country's public health care system. 
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