The IMF's World Economic Outlook report, released Tuesday, pit Canada's growth forecast for 2013 at 1.5%, down from its October estimate of 2%. Meanwhile, Japan and the United States are moving along, with growth rates of 1.6% and 1.9% respectively, despite a sluggish rate of 0.3% for Europe.
The IMF said Canada’s economy is expanding at the slowest pace since 2009, one year after the start of the 2008 economic downturn. The housing boom at the time helped keep Canada's economy from venturing deeper into the recession but high levels of household-debt constrained demand. The IMF advises the Harper government to prepare growth-supporting measures to counter a continued weakening trend since they've chosen to cut spending and stem increases in household borrowing. They suggested maintaining steady deficits and freezing the Bank of Canada's interest rate at 1%.
“The main challenge for Canada’s policy-makers is to support growth in the short term while reducing the vulnerabilities that may arise from external shocks and domestic imbalances,” the body advises.
“Although fiscal consolidation is needed to rebuild fiscal space against future shocks, there is room to allow automatic stabilizers to operate fully if growth were to weaken further.”