Canada almost in recession, says bank

The US economic slowdown and global financial crunch have cast their shadow on resources-rich Canada, which has almost entered recession, according to the Bank of Canada.

In its quarterly report released Thursday, the country's top bank says economic growth during the year's second quarter will crawl to just 0.3 percent. Earlier, the bank had pegged it at 2 percent.

It has also downgraded the growth rate from 2.3 percent to 1.8 percent for the second half of the year.

Bank of Canada governor Mike Carney said the downturn in the US would badly hit Canadian exports, leading to recession trends likely to persist till the middle of next year.

The US accounts for more than 80 percent of Canadian exports. The housing sector collapse in the US has led to credit crunch there, hitting Canadian exports.

Further, the rising Canadian dollar has not helped the manufacturing sector, particularly in Ontario, where a large number of jobs have disappeared.

Because of a high Canadian dollar, tourism from the US has declined considerably. Tourism pumps in billions of dollars in the economy of Toronto alone.

The high Canadian dollar - which has remained at par with the US dollar since late last year - has also hit Canadian exports of manufactured goods.

The loonie - as the Canadian dollar is called - has been kept high by rising fuel and metal resources, which Canada has in abundance.

This, coupled with strong domestic demand, will however help Canada weather recessionary trends.

Prime Minister Stephen didn't seem worried when he told a chamber of commerce near Montreal that Canada was in a position to withstand global signs of recession because of its strong economic fundamentals.

Indo-Asian News Service