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Old 01-06-2011, 05:28 AM
idiotstockinvestor idiotstockinvestor is offline
Join Date: Oct 2010
Posts: 120
Default Recession could have permanent impact if Canada doesn't take action: report

This sounds interesting, we already know we aren't getting enough foreign investment and I know that our IT market in Canada is practically non-existent.

Recession could have permanent impact if Canada doesn't take action: report

Mary Gazze, The Canadian Press, On Thursday December 30, 2010, 7:57 pm
By Mary Gazze, The Canadian Press
TORONTO - The recent economic crisis could permanently limit Canada's productivity and future GDP growth unless governments get rid of barriers to foreign ownership and Canadian firms spend on innovation, according to a report published Thursday.
The report by the Ottawa-based Centre for the Study of Living Standards notes that Canada survived the recession relatively well compared with other countries but that the economic crisis still led to a downward spiral in potential growth.
For example, the lower level of investment that came with the downturn led to a one percentage point fall in potential GDP growth last year, which the report's authors describe as "severe."
They expect growth to swing back to the positive side at about two per cent in the medium term, but that is still at a rate below pre-crisis levels.
"That will be reversed over time but still, even by 2015 we're going to be growing at a lower rate potentially than we were back in 2006 and 2008, so the recession really hurt the economy in terms of our ability to produce," said Andrew Sharpe, the centre's executive director.
Higher labour productivity levels are important because they lead to higher income per worker.
Sharpe said the country's productivity will naturally decline over time as baby boomers retire and there are fewer workers around to produce.
But that the trend can be turned around with strategic economic policies, including removing obstacles that make it harder for seniors over age 65 to work, according to the centre's report.
It also cites the need to bolster research and development, which is typically low in Canada compared with the rest of the world.
The report's authors, economists with the International Monetary Fund, suggest Canada can improve its growth potential with policies that encourage international trade and reduce barriers that prevent foreign ownership of telecommunications companies, airlines and broadcasters.
Canadian Auto Workers union economist Jim Stanford said low productivity gains nationally are partly due to lower output in Alberta's oilsands, as the resource becomes more difficult to extract.
"Our absolute level of labour productivity is no higher today than it was three years ago. That's a pretty damning statistic," he said, adding that despite government tax breaks, business investment has been low in Canada.
"I think part of the problem is globalization: businesses are investing, they're just not investing here. I also think part of the reason is our failure to do what the Japanese and Germans did, which was create a critical mass of high-tech firms that carve out niches in world markets."
Sharpe said bolstering research and development is one of the keys to Canada's economic recovery, but spending is typically lower in Canada compared with the rest of the world, and Canadian firms are spending less and less every year although it's not clear why.
"Wealso spend less on information communication technology per worker than the United States. It's another real structural problem. We have a good labour force but we can do better in terms of having," he said.
The report said that even though Canada might need help as it continues to recover, its outlook is better compared with much of the world due to strong economic frameworks that helped it avoid much of the impact of the recession in the first place.
It also lauded the federal and provincial governments for cutting corporate income taxes and considering policies that would increase competition and productivity.
In a separate report released Thursday on the IMF's website, the organization's chief economist, Olivier Blanchard, said most developed countries will continue to experience only a slow economic recovery in 2011, with growth so weak it will barely be enough to reduce unemployment.
Blanchard said both developed and developing countries should focus on rebalancing their economies next year by taking steps to control debt and by letting exchange rates adjust more freely.
“Without this global rebalancing, there will no healthy recovery,” he said.
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