The IMF and Austerity
Today’s IMF economic update further downgrades growth projections, including here in Canada where growth in 2012 is forecast to be just 1.7%, down from the IMF’s September forecast of 1.9%.Â That is well below the just released Bank of Canada forecast of 2.0%, and clearly implies rising unemployment.
On fiscal policy they say:
Countries should let automatic stabilizers operate freely for as long as they can readily finance higher deficits. Among those countries, those with very low interest rates or other factors that create adequate fiscal space, including some in the euro area, should reconsider the pace of near-term fiscal consolidation. Overdoing fiscal adjustment in the short term to counter cyclical revenue losses will further undercut activity, diminish popular support for adjustment, and undermine market confidence.
Canada has record low interest rates and the lowest net debt to GDP ratio of the large advanced industrial countries. Maybe we should reconsider austerity.