Economic activity is expected to grow at rates close to potential in the next two years, with the foreseen slowdown in domestic demand being offset by improving global market prospects. The surge in energy prices has boosted headline inflation temporarily in 2005 above the upper end of the monetary policy target range.
With such inflationary pressures emerging, the Bank of Canada started increasing its policy rate in September and will need to continue to bring interest rates to around their neutral level. Given the buoyant macroeconomic outlook, any additional fiscal stimulus should be avoided. By contrast, more attention should be given to preparing the economy to cope with the rising long-term spending pressures from an ageing population.
|Population (000s), 2004||31 946|
|Area (000 sq km)||9 976|
|GDP (Billion USD), 2004||978.5|
|Life expectancy at birth (Women, Men), 2002||82.1, 77.2|
|Total labour force (000s), 2004||17 239|
|Indicators||% change unless otherwise indicated|
|Household savings ratio||-0.4||-0.1||0.4|
|Consumer price index||2.4||2.4||1.7|
|Short-term interest rate (%)||2.8||4.1||4.3|
|Unemployment rate (%)||6.8||6.6||6.6|
|General government financial balance (% GDP)||1.3||0.9||0.6|
|Current account balance (% GDP)||1.8||2.5||3.0|
© OECD Observer, No. 252/253, November 2005