Monday, April 01, 2013

“It’s all Good in Canada.” Really?!

During The Recent Election Campaign The Newly elected Prime Minister of Canada Stephen Harper touted Conservatives as The Best Economic Managers The Country has ever had. But can his so-called ‘Best Brigade’ Assure Canada of a growth that’s really sustainable in The Long run?

On May 30, 2011, when the 308-seat House of Commons of Canada next rises, it will be dominated by 167 Conservatives. Well, this certainly means a lot to Stephen Harper, who, despite winning two previous elections (Harper was first sworn in as Canada’s Prime Minister in 2006), has never before held a majority government. But then, does this really mean anything to the Canadian economy which, perhaps, is standing on the verge of a slowdown?

Interestingly, all this while, Harper has been repeatedly telling Canadians that the Conservatives are the “Best Economic Managers” that the country has ever had, and it’s because of them that Canada bounced back strongly from the global financial crisis. “But are they, really?” is the question that several have been asking on the streets of Ottawa & Toronto since March 25, 2011 when Canadian opposition parties had brought down Harper’s government by supporting a motion of no confidence that held Harper in contempt of Parliament for refusing to share financial details of decisions taken by him with the House.

No doubt, to some extent Harper seems right, as of the seven industrialised nations that comprise the G7, Canada clearly stands out when it comes to economic recovery from the recent recession. It not only expanded at an annual pace of 5.8%, but also recovered both the employment and real output losses that accrued over the troubled course, in just one year. But then, though Harper now has the clear mandate to deliver on his promises and the freedom to do so without much intervention from the opposition, there are many who still doubt his claims. And, there are good reasons for Canadians to be sceptical of Harper’s claims and even more reasons to be worried about what his promises (currently, the Harper administration projects a deficit of $29.5 billion for this fiscal year and a return to surpluses by 2014-2015) and policies would mean for Canada’s economic future.

After growing at a red hot annualised rate of 5.8% in Q1 2010, Canadian economic growth had come down to just 1.8% in Q3, 2010. Though the GDP growth has unexpectedly risen to 3.33% in Q4 2010, the celebration isn’t going to last long as domestic demand, which so far fuelled this growth, is all set to decrease in the near future. While a still healthy job market (employment growing at 2% y-o-y in Q1 2011) should continue to fuel domestic demand, there are several potential headwinds that need to be avoided. Further, with the benefits of the inventory swing (inventory rebuilding had accounted for over 33% of GDP growth in 2009) behind and the boost from government stimulus (over $60 billion in 2009 and 2010) fading, how is that Harper’s so called “Best Economic Managers” going to sustain Canada’s economic boom in the long run? In fact, they have yet to explain how they will find $1.6 billion in cuts already booked in the 2011 budget.

Source : IIPM Editorial, 2012.
An Initiative of IIPM, Malay Chaudhuri
and Arindam Chaudhuri (Renowned Management Guru and Economist). For More IIPM Info, Visit below mentioned IIPM articles