OTTAWA (Reuters) - Canada’s economy has started the slow climb to recovery but only because of the emergency measures taken by the government and central bank, with business activity still lagging, Bank of Canada Governor Mark Carney said on Tuesday.
In an interview with the Canadian Broadcasting Corporation, Carney repeated a message delivered by Prime Minister Stephen Harper this week: the recession may be over in a technical sense but there is still a tough struggle ahead before there is a full recovery.
The unemployment rate will continue to rise even as the economic data brightens, although it may not hit the double-digit levels some are predicting, he said.
Carney said Ottawa’s fiscal stimulus package and the central bank’s conditional commitment to hold rates at a record low of 0.25 percent until next year had helped the country pull out of a three-quarter downturn. But he saw no evidence of a meaningful private sector rebound.
“That growth that we are seeing is largely the result of policy -- monetary policy and fiscal policy -- and measures to stabilize the financial system, so we have a ways to go before we’re really going to see true growth, self sustaining private sector growth,” Carney said in an interview with the Canadian Broadcasting Corporation.
“We’re at the easy bit of the growth and it’s a little early right now to say we’re seeing that self-sustaining private sector growth that is going to carry us up and prevent that second dip, but it would be too much to say that one expected things to fall back,” he said.
Canada’s jobless rate will likely rise further, he said.
“But it is not a foregone conclusions that it is going to go that high,” he said when asked if the unemployment rate would rise to double-digit levels.
Carney said the duration of high unemployment in Canada would depend on how quickly businesses restructure to remain competitive in the post-crisis global economy where demand will shift to emerging economies like China and India and away from the United States, the top market for Canadian goods.
“The recession was more difficult and the recovery will be more difficult so that will require more restructuring of our economy than would normally be the case,” he said.
“The businesses that are out in front are starting, but others need to think hard.”
U.S. economic growth will be choppy over the next year to 18 months, he said, making it more difficult for Canadian exporters to return to past growth rates unless they offer new products and penetrate new markets.
Editing by Jeffrey Hodgson