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Ottawa, March 10, 2004
2004-019

International Monetary Fund Praises Canadian Economic and Fiscal Policies

Minister of Finance Ralph Goodale welcomed the International Monetary Fund’s (IMF’s) strong endorsement of Canada’s economic, fiscal and monetary policies, contained in its most recent report released today.

“Today’s report makes it clear that the IMF supports the steps Canada has taken to respond to economic challenges and ensure the long-term prosperity of Canadians,” said Minister Goodale. “It reaffirms that a prudent, balanced approach pays off.”

The Staff Report for the 2004 Article IV Consultation with Canada concludes that Canada’s “considerable success” in fiscal management has enabled the Canadian economy “to respond flexibly to recent shocks and laid a solid foundation for recovery.” The IMF expects stronger growth in Canada in 2004, fuelled by household spending and a pickup in business investment.

The IMF also commended Canada on the quality of its fiscal management, which in many cases “represents best practice” when compared to other nations. In particular, the IMF highlighted Canada’s use of private sector economic forecasts and prudence factors, and the use of contingency reserves in its fiscal forecasts. It also endorsed Canada’s inflation targeting framework, stating it has “successfully guided monetary policy and achieved low inflation, while promoting transparency and accountability.”

Among other key findings in the report:

• Economic forecast: “GDP growth is projected to pick up from around 1½ per cent in 2003 to 2¾ per cent in 2004.…Household consumption and residential investment would continue to be supported by low interest rates and recent tax cuts.”

• Fiscal policy: The report states that Canada’s fiscal policies have left Canada “well placed to cope with expected pressures from population aging compared with many other G-7 countries.”

• Expenditure review: The IMF considers the current review of existing federal programs “welcome” and encourages the Government to focus on further controlling expenses.

The IMF’s full report on Canada can be found on its Web site at www.imf.org.

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