OTTAWA -
The Bank of Canada is declaring the recession essentially over in Canada and projecting the economy will bounce back at least twice as strongly as in the United States.
The bank's quarterly monetary policy report released Thursday contains many cautions about how the world and Canada is coming out of the deepest and most painful downturn since the Second World War.
The bank remains concerned that the fragile financial systems in the United States and Europe may contain more unpleasant surprises that will sideswipe the global economy once more, and it believes the strengthening loonie is not helpful given the Canada's dependence on exports.
As well, it warns the recovery is at best nascent and dependent on massive government stimulus and historic low interest rates to support domestic activity and consumer spending.
But overall, the new outlook represents a clearly more optimistic view of the Canadian economy than governor Mark Carney presented in April, when he saw the contraction that began last October lasting at least until the fourth quarter of 2009, and the dip in the first month of this year breaking all records.
However, with the economy supported by better financial conditions and higher levels of business and consumer confidence than anticipated, the downturn in activity in the first half of the year has been less severe, and growth is now projected to turn positive in the third quarter (of 2009)," the bank now says.
The Bank of Canada first indicated it was about to brighten its outlook on the economy on Tuesday in a statement accompanying the decision to keep short-term interest rates unchanged.
At that time, it said the economy would shrink by 2.3 per cent this year and expand by three per cent next.
