Alexa

Bank of Canada governor projects moderate upturn in economy in 2007

Bank of Canada governor projects moderate upturn in economy in 2007

Prospects for the Canadian economy are solid for 2007 after sluggishness in the last half of 2006, the governor of the Bank of Canada said Thursday.
David Dodge said growth should hit an annual rate of 2.75 percent by the end of the year, well above the 1.6 percent recorded in the second half of last year.
Overall, inflation should run at just over 1 percent this year, rising to the bank's 2 percent target by 2008.
In comments prepared for the Canadian Netherlands Business and Professional Association and the European Union Chamber of Commerce, Dodge said troubles in the U.S. housing and auto industries, which hurt Canadian exports last year, may have bottomed out.
"There is evidence that a significant portion of the adjustment in the automotive sector has already taken place, while the adjustment in the housing sector continues."
He also said housing demand in Canada, which threatened to push inflation up, is likely to stabilize along with house prices. Consumer spending had been rising as homeowners borrowed against their increased equity.
"We have seen a slight deceleration in the annual rate of increase of new house prices more recently."
Dodge said risks on both sides of the inflation issue are roughly balanced.
One concern, however, lies on the international scene, he said.
He added that the world economy could be in trouble if imbalances between the debts run up by the United States and the huge savings in some Asian and oil-exporting countries are not resolved in an orderly fashion, though he sees no immediate threat.
"As long as market participants have reason to believe that policy makers will take appropriate actions, there is no reason to expect that these imbalances won't be unwound in a gradual and orderly way," he said.
Dodge urged that the International Monetary Fund be given a stronger mandate to watch over the global economy.
"We believe that the IMF still has an important role to play," he said. "The danger posed by global imbalances shows that we need an international institution charged with supporting the smooth functioning of the global economy."


Updated : 2021-02-28 03:28 GMT+08:00