IMF Says Canadian Dollar’s Strength Could Be Drag on Growth

By Alexandre Deslongchamps
Oct. 23 (Bloomberg) -- The Canadian dollar’s strength could slow the country’s recovery and lower inflation, the International Monetary Fund said today in its regional economic outlook, echoing remarks made by central bankers yesterday.
“In addition to potential new global headwinds, a stronger Canadian dollar and difficulties in the ongoing restructuring of key industrial sectors could act as a significant drag on growth and weigh on inflation,” the report said.
The currency, nicknamed the loonie for the aquatic bird on the C$1 coin, has gained 16 percent this year against the U.S. dollar.
The Bank of Canada said yesterday the country’s stronger currency will keep inflation below policy makers’ 2 percent target for almost two years and hobble a recovery from the first recession since 1992.
The IMF said the economy is displaying “comparative resilience,” thanks to low debt levels and a decade of fiscal surpluses. The central bank’s “aggressive cuts in policy rates and other extraordinary liquidity measures have provided needed monetary support,” according to the report.
To contact the reporters on this story: Alexandre Deslongchamps in Ottawa at adeslongcham@bloomberg.net