Canada is the world’s eighth largest economy which has been affected by the global economic crisis.
Canada’s strong link with the United States has to a great extent impacted on the economy of Canada, but is better placed than most countries with similar relationships with the U.S. due to sound policy management and proactive steps taken to maintain financial and economic stability.
By the time the economic crisis impacted Canada, they were on a solid footing as they had experienced strong growth, fiscal and current account surplus, price stability, low unemployment and financial stability. Despite such a backdrop Canada’s economy still faces a tough 2009.
If you take industry wise, Canadian banks have so far not crashed and is unlikely to do so in the near future as the Canadian banking sector is reportedly the best capitalized and most stable banks in the world. It is believed that Canada’s banking system is strong and the regulation of monetary policies by Bank of Canada and the country’s handling of the deficit have been commendable. The same could be said of the Insurance industry which is expected to come out of the crisis triumphantly. However, Bank of Canada, the financial regulatory authority has taken steps to ensure that the financial system is safe. Canada has slashed interest rates by 400 basic points since December 2007. The Central Bank has also announced its plans to increase the quantum of cash available to lenders. These are measures taken by Canada to support the G7 partners commitment to pump billions of dollars into the market and to loosen the credit restrictions and to restore lending.
Despite the positive side of the handling of the country, Canada is likely to experience the negative impacts of their trading partners. Canada has faced the highest unemployment rate in seven years which was 8% in February and is expected to decrease due to the decline in export and soft commodity prices. This has caused household spending to be curtailed. Prices of commodities are falling and so is the share price of their producers. This is expected to negatively impact the economy of Western Canada in particular. Export of cars and other manufactured goods to the United States has also been on the decline but due to the value of the Canadian dollar dropping against the U.S. dollar the Canadian manufacturers are optimistic of their exports.
Bank of Canada has predicted a forecast of Canada’s GDP to grow by 4% by 2010, though it is believed to be ambitious but even if it is halved, it is still better than their U.S. and British counterparts.
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