Canadian Finance Minister Jim Flaherty has welcomed the International Monetary Fund's (IMF) annual review of Canada's economic developments and policies, which has endorsed the government’s Economic Action Plan.
In its 2009 Article IV Consultation with Canada report, the IMF commends the government's fiscal stimulus plan as "large, timely, well diversified and structured for maximum effectiveness."
"I am pleased to see the IMF's favourable report on Canada's Economic Action Plan," said Flaherty. "Canada is better placed to come out of the current economic crisis on a much stronger footing than many other countries.”
The IMF said that Canada entered the crisis on a solid footing, “reflecting a strong macroeconomic framework, rigorous financial regulation, and robust corporate balance sheets.”
"Through 2007, sound macroeconomic and financial policies along with a commodity boom delivered strong growth, stable inflation, fiscal and current account surpluses, historically low unemployment and financial stability,” the Fund noted. However, it added that “the crisis has significantly affected Canada's economic and financial conditions, given its openness to trade and financial flows.”
Building on the permanent tax relief measures announced in October 2007, the government tabled further fiscal stimulus of around 2.8% of GDP in January 2009. These included, among other measures: personal income tax cuts though raising tax thresholds; increased tax credits for pensioners and first-time homebuyers; an increase in the amount of business income entitled to the 11% small business tax rate; and the elimination of CAD440m worth of tariffs in a number of industrial and agricultural sectors.
"I am working with my provincial colleagues to ensure that Canada's Economic Action Plan is implemented as quickly as possible," said Minister Flaherty. "I am convinced that the Plan will make a real difference for Canadians and allow us to emerge from this global recession in a much stronger position."
However, the package and the economic downturn will end an 11-year string of fiscal surpluses, which allowed Canada to achieve the lowest debt-to-GDP ratio among G-7 countries.
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