Not so Loonie

1 June 2009 By Martin Hutchinson

Its biggest bailout to date wasn t one of its own but rather GM s local arm. Its banks are sound, its recession relatively shallow, and its finances in reasonable shape. With an economy strong in resources and a fiscally careful government, Canada looks safer in turmoil.

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Canada's real GDP declined at an annual rate of 5.4% in the first quarter, after a 3.7% rate of decline in the fourth quarter of 2008.

The Canadian and Ontario governments are to lend General Motors Canada $9.5bn as part of the GM bankruptcy, receiving 12% of the equity in the new GM, but will not provide loans to parts manufacturers. The Canadian government does not have a statutory obligation to bail out GM Canada's $6.5bn pension plan deficit, but part of the restructuring loan may be used for this.

Canada has not bailed out its banks directly, but the Canada Mortgage and Housing Corporation allocated C$75bn ($65bn, or 4% of GDP) to purchase insured Canadian mortgage pools.

Canada's real GDP is expected by the Economist to decline by 2.3% in 2009; its budget deficit is expected to be 2.3% of GDP and its current account deficit 2.0% of GDP.

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