The Canadian and United States stimulus packages to kickstart the battered North American economy won’t be fully felt until 2010, says Bank of Canada governor Mark Carney.
The central banker told a House of Commons committee yesterday that low interest rates, exceptional cash injections into the financial system and multibillion-dollar stimulus spending will eventually rescue the economy, but that it will take time.
His forecast suggests the Canadian economy will continue to shed jobs for the next year or so and unemployment could rise to more than nine per cent.
Economists expect the Canadian economy to shrink by more than one per cent this year as the manufacturing sector continues to shed employment and resources industries cut jobs to cope with lower prices for oil, grain, metals and minerals.
Carney was under pressure from MPs to defend his forecast from January that sees the economy rebounding to 3.8 per cent in 2010, a projection seen as rosy by many economists.
“We don’t do optimism; we don’t do pessimism; we do realism at the Bank of Canada,” he said. “We don’t do spin.”
But Carney admitted that there is wide disagreement among economists about how deep the recession will be and how long it will last.