Canada is outperforming its global counterparts in steering its economy and managing potential landmines, says the International Monetary Fund.
"Thanks to a decisive policy response, a resilient financial sector, and high commodity prices, the economy expanded well above its potential growth rate in 2010," said Gian Maria Milesi-Ferretti, chief of the North America division of the Western Hemisphere Department, on Monday in a preliminary report.
The international organization, which offers guidance and advice on global finance, sent a delegation to Canada in mid-October to conduct an annual report on the state of the country’s economy, as it does for all 187 member nations.
The IMF’s medium term outlook for Canada is "broadly favourable," with growth forecast at 2% on average for both 2011 and 2012.
However, Milesi-Ferretti warned of external pressures including weak demand from trading partners, a strong Canadian dollar, high real estate prices, and high household debt rates.
Last week, the Bank of Canada predicted the economy will slow in the final three months of the year, at a feeble annualized pace of 0.8% from October to December, a long way from its earlier call of 2.9%.
The IMF cautioned that while Canada is focused on dealing with the deficit after implementing stimulus programs during the 2008 financial crisis, it may need to consider temporary spending if the global economy spirals downward.
The agency also credited the federal government for tackling high real estate prices by changing mortgage lending rules, which "may lead to a more subdued pace of household borrowing and a moderation in house prices going forward."
However, the IMF warned if house prices, especially in Toronto and British Columbia, and household debt continue to rise faster than disposable income, more measures may be needed to cool the housing market.
In a news release, Finance Minister Jim Flaherty praised the IMF’s findings, noting that the organization endorses the measures the government has taken, especially in changing rules for government-backed insured mortgages.
Flaherty added the IMF cited Canada’s solid banking sector with its "high prudential standards and rigorous supervision."
Walid Hejazi, a professor of international competitiveness at the Rotman School of Management, said over the years, Canada has managed the economy well, from eliminating the deficit in the 1990s, to introducing the GST and signing the free-trade agreement.
"This is just another A on our report card," said Hejazi. "The Canadian economy is sound."
However, Hejazi cautioned Canada doesn’t operate in a vacuum, so it might need to react or adapt policies, depending on how the U.S. or European economies fare.
Despite the growing Occupy Wall St. movement, Hejazi added the situation in Canada is not nearly as bad as the situation is in the U.S. "We do have this occupy movement going on in Canada. It’s not nearly as big. It doesn’t have nearly the momentum," he said.
