1 April 2009

Do more to boost economy, OECD urges Harper

This article is extracted from the 1 April 2009 edition of “globeandmail.com”.

Prime Minister Stephen Harper arrived at a crucial economic meeting of world leaders last night facing calls that he aggressively stimulate the Canadian economy beyond the plans laid out in January's budget.

The request came from the Organization for Economic Co-operation and Development, which is forecasting even tougher times ahead for the Canadian and world economies. And it came as some leaders of the G20 major economies … say there is a need for stimulation beyond what was agreed to in Washington last November to ease the economic crisis. Those individuals include U.S. President Barack Obama and the conference's host, British Prime Minister Gordon Brown.

The OECD report says the Canadian economy will shrink by 3 per cent in 2009, with the jobless rate rising to 10.5 per cent next year. Unemployment currently stands at around 7 per cent.

The report says Canada has the fiscal capacity to increase its stimulus spending and urges the Bank of Canada to hike the money supply to get credit flowing. Ottawa has so far announced $40-billion in stimulus spending, equivalent to 3.2 per cent of gross domestic product. The International Monetary Fund has asked the G20 nations to allocate stimulus spending equivalent to 2 per cent of GDP….

Even as the leaders began arriving last night, expectations for the summit were being lowered as the G20 split over the issues of increased stimulus on the one hand and stricter international economic regulation - a notion backed by continental European leaders - on the other. The leaders, meanwhile, played up the limited agreement they hope to find on providing more money for the IMF, the international agency that provides financial aid to poorer nations….