Harper is fortunate that the election was held before all this bad news. During the election Harper dismissed the whole idea of a deficit and kept claiming that Canada was in great shape unlike the US. Well perhaps in some ways he is right in his comparison of our situation with the US but it turns out that the situation is much worse than Harper allowed. Also, the decline in commodity prices is going to hurt Canada more than the US especiallly some western provinces such as Alberta and Saskatchewan.
Canada to be hit by recession, 7.5% jobless rate, OECD warns
Last Updated: Tuesday, November 25, 2008 8:24 AM ET
The global financial crisis could increase jobless numbers in OECD countries by eight million people, hit Canada with a recession and boost the country's unemployment rate to 7.5 per cent, according to a report.
The latest Organization for Economic Co-operation and Development outlook said Tuesday the world is entering the worst economic downturn in decades.
"We project that 21 out of 30 member economies of the OECD will go through a protracted recession of a magnitude which has not been seen since the early 1980s," said Klaus Schmidt-Hebbel, the OECD chief economist.
Among some of the OECD forecasts:
U.S. output will decline through the first half of 2009, but will pick up gradually as the effects of the credit crisis wane. GDP is projected to fall 0.9 per cent next year, before rising 1.6 per cent in 2010. But the recovery will be "languid" because consumption will be held back by losses in households' wealth.
European economic activity will also fall over the next six months but gradually recover. GDP is forecast to fall 0.6 per cent in 2009 and climb 1.2 per cent in 2010.
Japan's output will stagnate over the second half of 2009. GDP will fall 0.1 per cent in 2009 then rise by 0.6 per cent in 2010
Hungary, Iceland, Ireland, Luxembourg, Spain, Turkey and the United Kingdom will also suffer severe effects from the economic downturn.
The gloomy outlook predicts Canada's economy will shrink in the fourth quarter by 1.6 per cent and in the first and second quarters of 2009 by 1.4 per cent first and 0.3 per cent respectively, meaning the country will be in recession.
Finance Minister Jim Flaherty has said that the country is not in a recession right now, but that going forward the country may have a technical recession.
A recession is defined as two consecutive quarters of gross domestic product contraction.
While real GDP growth is not expected to return until the second half of 2009, the outlook predicts real GDP growth in Canada with be down by 0.485 per cent for that year. But real GDP will climb in 2010 by 2.131 per cent.
The outlook also predicted that Canada's jobless rate will climb to seven per cent in 2009 and 7.5 per cent in 2010. The rate currently stands at 6.2 per cent.
According to the report, 1,281,312 Canadians would be unemployed in 2009, increasing to 1,377,528 in 2010.
As well, the OECD said that crashing commodity prices and declining tax revenues will cause the federal and provincial governments to post deficits in 2009 and 2010.
But the report says that deficit is a "largely cyclical outcome that is not alarming" but "underlines the need to keep a lid on discretionary expenditure increases."
Among OECD countries, the outlook warns that jobless numbers could rise to 42 million by 2010, from 34 million currently.
Also, economic activity is expected to fall by an average of 0.4 per cent in 2009, before rising slowly to 1.5 per cent the following year.
Schmidt-Hebbel cautioned that the uncertainties associated with the outltook "are exceptionally large, especially those related to the assumptions regarding the speed at which the financial market crisis — the prime driver of the downturn — is overcome."With files from Reuters