The International Monetary Fund, IMF, has mentioned in a report published yesterday that the main export market of Canada, the United States is heading towards a recession. The report has cited the current financial crisis as the main cause behind the downturn. In the report the IMF has also expressed his support for the proposed bailout of the banking system by the US government.
A Canadian bank has opined that the economy of Canada has not been expected to recover in the coming year and the economy would become weaker in the next year. This applies to the US economy too! In a report which was published after the US Senate consented to the revised $700 billion bailout, the IMF informed that the financial turmoil resulting due to distress in the banking sector are likely to be involved with the prolonged downturns.
The report also mentioned that an economic downturn would occur after the financial stress especially if it is headed by a speedy expansion of credit with prices of houses going up and the increased borrowings by the households and the financial firms. The report also reminds that there have been previous episodes of financial stress related to the banking industry that have led to recessions and the current situation in the United States might lead to similar situations.
The Bank of Canada has estimated that a deep recession in the US can have an adverse effect on the Canadian economy, but the presence of a healthy banking sector in Canada can safeguard the Canadian economy against such downturns in the US economy. But the projected growth in Canada’s economy for the year 2008 has been estimated as .7 percent by the National Bank of Canada while Bank of Canada estimated the figure as 1 percent. And the figure becomes lesser, around .6 percent for the coming year.
An economist at the National Bank, Stefane Marion, opines that it is time to see the capabilities of the US authorities to prevent the spread of the credit crisis to the real economy. The IMF report has graded the current financial crisis as an intensive one which can virtually affect all countries.
Recession
