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© 2004 International Monetary Fund
March 2004
IMF Country Report No. 04/61
Canada: 2004 Article IV Consultation—Staff Report; Staff Statement; and Public Information Notice on the Executive Board Discussion
Under Article IV of the IMF’s Articles of Agreement, the IMF holds bilateral discussions with members, usually every year. In the context of the 2004 Article IV consultation with Canada, the following documents have been released and are included in this package:
the staff report for the 2004 Article IV consultation, prepared by a staff team of the IMF, following discussions that ended on November 19, 2003, with the officials of Canada on economic developments and policies. Based on information available at the time of these discussions, the staff report was completed on January 15, 2004. The views expressed in the staff report are those of the staff team and do not necessarily reflect the views of the Executive Board of the IMF.
a staff statement of February 18, 2004 updating information on recent developments.
a Public Information Notice (PIN) summarizing the views of the Executive Board as expressed during its February 18, 2004 discussion of the staff report that concluded the Article IV consultation.
The document(s) listed below have been or will be separately released.
Selected Issues Paper
The policy of publication of staff reports and other documents allows for the deletion of market-sensitive information.
To assist the IMF in evaluating the publication policy, reader comments are invited and may be sent by e-mail to publicationpolicy@imf.org.
Copies of this report are available to the public from
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Washington, D.C.
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INTERNATIONAL MONETARY FUND
CANADA
Staff Report for the 2004 Article IV Consultation
Prepared by the Staff Representatives for the 2004 Consultation with Canada
Approved by Charles Collyns and G. Russell Kincaid
January 15, 2004
Discussions for the 2004 Article IV consultation were held in Quebec City and Toronto during November 5-7, and in Ottawa during November 12-19, 2003. The staff team comprised C. Towe (Head), M. Möhleisen, R. Cardarelli, R. Luzio (all WHD), and A. Kose (RES). Mr. Singh and Mr. Collyns attended the concluding meeting on November 19. Mr. Bennett (Executive Director) and his Advisor, Mr. Kruger, participated in the discussions.
The team met with representatives from both the public and private sectors. Discussions were held with Bank of Canada Governor Dodge and Deputy Finance Minister Lynch, as well as other senior officials from Finance Canada, the Bank of Canada, the Office of the Superintendent of Financial Institutions, Health Canada, Human Resources Canada, the provinces of Ontario and Quebec, and the Ontario Securities Commission. The team also met with the major banks, the Toronto Stock Exchange, and the Canadian Labour Congress.
The staff report for the 2003 Article IV consultation was considered by the Executive Board on January 31, 2003 and was subsequently published as IMF Country Report No. 03/33. Executive Directors broadly endorsed the authorities’ inflation targeting framework. While they saw a gradual withdrawal of monetary stimulus as the most likely course, they welcomed the commitment to act even more decisively if inflation pressures intensified. Directors commended the authorities’ prudent fiscal management but cautioned that looming demographic pressures required the debt ratio be kept on a steady downward trajectory and emphasized that reforms to the health care system would need to be consistent with longer-term fiscal constraints. Directors also noted the continuing need to promote employment and productivity, including through further reforms of the Employment Insurance system, as well as agricultural and trade policies. Directors welcomed the authorities’ efforts to strengthen corporate governance, with some Directors suggesting the establishment of a more unified system of securities regulation.
Canada subscribes to the Fund’s Special Data Dissemination Standard. The quality, coverage, periodicity, and timeliness of Canadian economic data are considered to be excellent, and metadata have been posted on the Fund’s Data Standard Bulletin Board.
ROSCs: A Data ROSC was published in October 2003, an FSAP was issued to the Board in January 2000, and a Fiscal ROSC was published in March 2002 (see Appendix I for a summary).
Contents
I. Introduction
II. Recent Developments
III. The Short-Term Outlook
IV. Monetary Policy and the Exchange Rate
V. Sustainable Fiscal Policy
VI. Financial Sector Policies in Support of Globalized Capital Markets
VII. Policies to Support Productivity and Income Growth
VIII. Staff Appraisal
Tables
1. Indicators of Economic Performance
2. Selected Economic Indicators
3. Balance of Payments
4. Selected Vulnerability Indicators
5. Key Fiscal Indicators
Figures
1. Real GDP and Domestic Demand
2. Real Effective Exchange Rate
3. External Indicators
4. Stock Prices
5. Interest Rate Spreads
6. CPI Inflation
7. Employment and Output Gaps
8. Labor Market Indicators
9. Monetary Policy Indicators
10. Federal Fiscal Balance
11. Net Government Debt
12 Corporate Balance Sheets and Profitability
13. Productivity Growth
Boxes
1. The Decline in the Canadian Personal Saving Rate
2. The Public Debt Sustainability
3. Labor and Capital Taxes in Canada
4. Canada-U.S. Trade Integration
Appendices
I. Fund Relations
II. Core Statistical Indicators
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Public Information Notice (PIN) No. 04/18
March 10, 2004
International Monetary Fund
700 19th Street, NW
Washington, D. C. 20431 USA
On February 18, 2004, the Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation with Canada.1
Washington, D.C. 20431 • Telephone 202-623-7100 • Fax 202-623-6772 • http://www.imf.org
