## _cr11364

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---

### RECENT DEVELOPMENTS AND OUTLOOK — Context and Current Conjuncture
- Recovery and growth
  - The Canadian economy recovered strongly in 2010; GDP returned to pre-crisis levels in Q3 2010.
  - The economy expanded well above its potential rate in 2010.
  - Unemployment declined from its 2009 peak but remained above 2008 levels.

- Labor market and wages
  - Total employment expanded by about 1½ percent relative to 2008.
  - Unemployment fell from 8¾ percent in August 2009 to 7.3 percent in October 2011.
  - Estimated long-run NAIRU is around 6 percent.
  - Manufacturing employment remains 10 percent below 2008 levels.
  - Wage growth was modest, with no real gains in the first half of 2011 relative to the same period in 2010.

- Household debt, housing, and consumption
  - Household debt stood at close to 150 percent of disposable income.
  - Private consumption growth decelerated markedly in the first half of 2011.
  - Mortgage growth moderated to 6.7 percent (s.a.a.r.) in August of 2011 following macro-prudential tightening since 2008.
  - Residential investment decelerated sharply in Q2 2011 after a prior-quarter surge.

- External sector and competitiveness
  - After a decade of surpluses, the current account balance shifted to a deficit of 3 percent of GDP in 2009–10.
  - Export volumes in 2010 remained below 2000 levels.
  - Foreign purchases of government and corporate debt securities were the main source of large net capital inflows.

- Inflation and monetary stance
  - Twelve-month headline inflation hovered around 3 percent; Bank of Canada control range is 1–3 percent.
  - Core inflation remained close to the 2 percent target.
  - The policy rate was kept constant at 1 percent since September 2010.

- Financial sector conditions
  - As of late November 2011, the stock market was some 10 percent lower relative to end-2010.
  - Credit to businesses rebounded to 6 percent y/y in Q3 2011.
  - The 3-month CAD Libor-OIS spread remained low; banks accessed funding at historically low rates.
  - Banking sector indicators:
    - Average returns on equity above 15 percent since 2010.
    - Nonperforming loans (NPLs) remained below 1.2 percent of total loans.
    - Provisioning ratios average 73 percent of NPLs for main financial institutions.
    - Tier 1 capital levels are above 13 percent under Basel II definitions.
    - Common equity ratios adjusted for Basel III deductions are above 7 percent.
  - Covered bond issuance by Canadian financial institutions reached C$40 billion by 2011.

### OUTLOOK AND RISKS
- Baseline projections
  - Staff projects growth to decelerate to around 2 percent on average in 2011 and 2012.
  - The current account deficit is projected to deteriorate to 3¾ percent of GDP in 2012.
  - The current account deficit is projected to remain around 3½ percent of GDP over the 2011–13 period.
  - Staff assesses the Canadian dollar to be on the strong side of medium-term fundamentals.

- Downside risks (tilted to the downside)
  - External shocks:
    - Weaker U.S. economy and distress in European debt markets could transmit via trade, financial, and confidence channels.
    - The U.S. accounts for over 70 percent of Canadian exports.
    - A large deterioration in terms of trade would widen the current account deficit; the 2011 current account evaluated at the 2005 terms of trade would show a deficit of 5¾ percent of GDP.
  - Commodity price risk from weak activity in Europe, the United States, or a slowdown in emerging markets (notably China).
  - Domestic vulnerabilities:
    - High and rising household indebtedness and elevated housing prices.
    - Staff downside scenario: an external shock centered in Europe lowering world GDP by around 2 percent after two years relative to the WEO baseline, combined with a 15 percent decline in house prices and a severe downturn in construction activity, could result in a GDP decline of some 2½ percent over two years relative to the baseline.

### MONETARY POLICY — Stance, Tools, and Contingency
- Current stance and justification
  - Monetary policy remains highly supportive given the negative output gap and challenging global environment.
  - The Bank of Canada kept the policy rate at 1 percent since late 2010.
  - Staff concurs it is appropriate to keep the policy rate exceptionally low for some time, provided core inflation and inflation expectations remain quiescent.
  - Taylor-rule estimates also suggest the current monetary policy stance is appropriate.

- Contingency and tools
  - Authorities stand ready to respond quickly to a deterioration in the economic outlook or spillovers from global market turbulence.
  - Staff estimate: a 75 bps rate cut could raise growth by about 0.3 percentage point.
  - In a severe external shock, the Bank of Canada could deploy additional measures as during the 2008–09 crisis and quickly activate instruments to provide liquidity.
  - The US$30 billion swap facility with the U.S. Federal Reserve was extended in June 2011 through August 2012.

### FISCAL AND MACROPRUDENTIAL POLICY
- Fiscal consolidation and medium-term path
  - Fiscal consolidation is under way as policy stimulus is gradually removed.
  - Federal government plans: a federal budget deficit reduction of some 1 percent of GDP in structural terms between 2010 and 2012, including by unwinding stimulus measures.
  - Provincial and local governments: staff expects a broadly stable deficit in 2011 and some deficit reduction in 2012.
  - Staff projections:
    - Reduction in the general government structural deficit of around 0.3 percent of GDP in 2011.
    - Reduction in the general government structural deficit of 0.8 percent of GDP in 2012.
    - The 0.8 percent of GDP consolidation "would imply a drag on economic growth of almost ½ percentage point."
  - General government gross debt expanded by almost 19 percentage points of GDP between 2007 and 2010, to 85 percent of GDP at end-2010.
  - Net debt rose to 30 percent of GDP.
  - Federal consolidation plan aims at a budgetary balance by 2015/16.

- Macroprudential measures and household indebtedness
  - Further sustained increases in household debt and house prices would increase risks to macroeconomic stability.
  - If recovery is accompanied by further increases in mortgage debt as a share of disposable income spurred by low interest rates, tightening of macro-prudential policies by the government may be needed.
  - Recent macro-prudential action: tightening of mortgage lending standards for government-backed insured mortgages since 2008, contributing to slower mortgage growth.
  - Suggested macro-prudential options: larger down-payment requirements for new mortgages; requiring lower debt service-to-income ratios.
  - Targeted measures for specific provinces were discussed; authorities are not considering regulations differentiated across provinces.
  - Continued tight supervision to ensure conservative underwriting and adherence to existing regulations.

- CMHC and fiscal risk
  - CMHC accounts for more than two-thirds of the mortgage insurance market and benefits from explicit government backing.
  - CMHC stress tests suggest insurance business is well positioned under severe scenarios; most significant risks stem from protracted high unemployment.
  - Staff estimates: a 15 percent decline in house prices would reduce the ratio of household net worth to disposable income by 45 percentage points, and could trigger a decline in private consumption by over 1½ percent.
  - Recommendation: undertake a review to ensure CMHC has a modern and effective governance structure and supervision, and assess scope to strengthen its risk management.

### FINANCIAL STABILITY AND REGULATORY REFORMS
- Overall resilience and risks
  - Canadian banking system withstood the international crisis well; banks are "well capitalized and have prudent management."
  - Direct exposures of Canadian banks to Europe are estimated to be limited, but further turmoil could affect Canada via higher funding costs, asset re-pricing, and lower liquidity.
  - Stress tests indicate manageable losses under adverse scenarios; only a protracted period of high unemployment (around 10 percent or higher) would lead to significant losses.
  - Elevated household indebtedness increases household vulnerability to shocks.

- Low interest rate environment risks
  - Prolonged low rates could encourage excessive borrowing and bank risk-taking; institutions with large fixed-income portfolios (insurance companies, pension funds) would be negatively affected.
  - Insurance firms: reallocated part of portfolios to non-fixed income securities, changed pricing strategies and product menus, and expanded abroad.
  - Pension funds with defined benefits may need to increase contributions or reassess benefits.
  - Banks: high capital and profitability help; persistently low rates could pressure margins and lead to business model changes. Expansion abroad poses supervisory challenges.

- International and domestic reform agenda
  - Authorities proceeding with Basel III capital and liquidity requirements and published regulatory guidance relating to non-viability contingent capital and transition for non-qualifying instruments.
  - Expectation that Canadian banks should meet 2019 Basel III capital requirements early in the transition period starting on January 1, 2013.
  - Authorities consider the Assets to Capital Multiple (ACM) rule as having served Canada well and will consider whether changes are appropriate to simplify dual reporting and adapt to Basel III leverage ratio elements.
  - Adoption of liquidity standards (LCR and NSFR) may be more challenging; authorities endorse both but prefer to await completion of an observation period before revising domestic regulations.
  - Implementation of NSFR likely requires banks to gradually increase retail deposit funding.
  - Authorities agreed in principle to an FSAP-Update penciled in for 2013.
  - Continued strengthening of AML/CFT compliance, including customer due diligence.
  - Progress on central counterparty (CCP) for repo markets and OTC derivatives noted; government intention to launch a national securities regulator in 2012 welcomed.
  - Substantial progress on recovery and orderly resolution plans for largest banks; "living will" work under way.

### EXTERNAL COMPETITIVENESS AND EXPORT PERFORMANCE
- Export performance and structural constraints
  - Export growth had been weak for over a decade; the 2008 crisis triggered a sharp deterioration in the external trade balance.
  - Authorities’ diagnosis: exchange rate appreciation, lagging productivity growth, and increased competition from emerging economies in the U.S. market.
  - Manufacturing sector undergoing adjustment; factors supporting recovery include robust business investment, U.S. recovery in key sectors, and large investment projects in energy and mining.

- Policy actions to boost exports
  - Government engaged in reaching new bilateral trade agreements and reviewing strategy toward improving business R&D.

### BOX 4 — Rising Health Care Spending Pressures
- Structure and recent trends
  - Public health care expenditures represent about 70 percent of total health expenditures.
  - The cash component of the “Canada Health Transfer” finances about 20 percent of provincial public health spending.
  - Public health care expenditures are estimated to have increased to around 8½ percent of GDP in 2009–10.

- Drivers and projections
  - Rapid growth in the 2000s mainly reflects high health care inflation, technological changes, and to a lesser degree demographic factors.
  - PBO projections:
    - Ageing contribution to public health spending would rise from 0.9 percentage points in 2010 to 1.2 percentage points by 2032, and decline gradually after that.
    - Absent ageing, health spending assumed to grow faster than nominal GDP by 0.4 percent a year (1976–2010 average).
    - Under these assumptions, public health expenditures would reach 13 percent of GDP around 2050, and 15 percent of GDP by 2085.
    - Annual federal elderly benefits are projected to rise by 1 percent of GDP by 2035/36.

- Fiscal implication
  - Rising health and ageing-related spending would lead to substantial increase in deficit and public debt over the long term if no compensatory measures taken.

### UPDATE NOTE (Information available after staff report)
- Recent developments
  - Real GDP grew by 3½ percent (s.a.a.r.) in Q3, after a small contraction in the previous quarter due to one-off factors.
  - Q3 growth reflected a strong rebound in net exports, while growth of final domestic demand weakened.
  - Canada’s current account deficit declined to 2.8 percent of GDP in the third quarter.
  - Unemployment rose to 7.4 percent in November.
  - Inflation fell slightly in October; core inflation remained around the Bank of Canada’s 2 percent target.

- Monetary and financial policy updates
  - On December 6, the Bank of Canada left the overnight rate unchanged at 1 percent.
  - On November 30, major central banks agreed to lower pricing on existing temporary U.S. dollar liquidity swap arrangements by 50 basis points; these arrangements extended to February 1, 2013.
  - The central banks agreed as a contingency to establish temporary bilateral liquidity swap arrangements if market conditions warrant.

- IMF Executive Board assessment and guidance
  - Directors commended authorities’ macroeconomic management and financial sector oversight.
  - Directors endorsed accommodative monetary policy and saw scope for further easing if the economy weakens.
  - Directors supported gradual fiscal consolidation and noted room for countercyclical fiscal support within medium-term consolidation plans if outlook deteriorates.
  - Directors welcomed macroprudential measures to curb mortgage debt build-up and highlighted need to strengthen oversight of CMHC.

### KEY STATISTICS AND PROJECTIONS (preserved exactly from source)
- Real GDP (annual change): 2006: 2.8; 2007: 2.2; 2008: 0.7; 2009: -2.8; 2010: 3.2; 2011 (Proj.): 2.2; 2012 (Proj.): 1.9
- Net exports (contribution to growth): 2006: -1.4; 2007: -1.5; 2008: -2.1; 2009: 0.2; 2010: -2.1; 2011 (Proj.): -1.3; 2012 (Proj.): -0.2
- Final domestic demand (annual change): 2006: 4.6; 2007: 4.0; 2008: 3.0; 2009: -2.1; 2010: 4.5; 2011 (Proj.): 2.9; 2012 (Proj.): 1.8
- Private consumption (annual change): 2006: 4.2; 2007: 4.6; 2008: 3.0; 2009: 0.4; 2010: 3.3; 2011 (Proj.): 1.9; 2012 (Proj.): 1.6
- Private fixed domestic investment (annual change): 2006: 7.1; 2007: 3.1; 2008: 1.2; 2009: -16.6; 2010: 8.4; 2011 (Proj.): 9.3; 2012 (Proj.): 5.3
- Private investment rate (percent of GDP): 2006: 20.5; 2007: 20.7; 2008: 20.8; 2009: 17.9; 2010: 18.8; 2011 (Proj.): 20.1; 2012 (Proj.): 20.7
- Unemployment rate: 2006: 6.3; 2007: 6.1; 2008: 6.2; 2009: 8.3; 2010: 8.0; 2011 (Proj.): 7.4; 2012 (Proj.): 7.2
- Consumer price index (annual change): 2006: 2.0; 2007: 2.1; 2008: 2.4; 2009: 0.3; 2010: 1.8; 2011 (Proj.): 2.9; 2012 (Proj.): 2.0
- Federal fiscal balance (percent of GDP): 2006: 0.8; 2007: 1.0; 2008: 0.2; 2009: -2.2; 2010: -2.6; 2011 (Proj.): -1.9; 2012 (Proj.): -1.5
- Provincial fiscal balance (percent of GDP): 2006: 0.0; 2007: -0.4; 2008: -1.0; 2009: -3.5; 2010: -3.5; 2011 (Proj.): -3.5; 2012 (Proj.): -3.1
- General government fiscal balance (percent of GDP): 2006: 1.6; 2007: 1.6; 2008: 0.1; 2009: -4.9; 2010: -5.6; 2011 (Proj.): -4.8; 2012 (Proj.): -4.0
- Three-month treasury bill: 2006: 4.0; 2007: 4.2; 2008: 2.4; 2009: 0.4; 2010: 0.6; 2011 (Proj.): 0.9; 2012 (Proj.): 1.0
- Ten-year government bond yield: 2006: 4.2; 2007: 4.3; 2008: 3.6; 2009: 3.2; 2010: 3.2; 2011 (Proj.): 2.8; 2012 (Proj.): 2.5
- Current account balance (percent of GDP): 2006: 1.4; 2007: 0.8; 2008: 0.3; 2009: -3.0; 2010: -3.1; 2011 (Proj.): -3.5; 2012 (Proj.): -3.8
- Merchandise trade balance (percent of GDP): 2006: 3.4; 2007: 3.1; 2008: 2.8; 2009: -0.3; 2010: -0.6; 2011 (Proj.): -0.7; 2012 (Proj.): -1.0
- Export volume (annual change): 2006: 0.8; 2007: 1.3; 2008: -5.3; 2009: -15.0; 2010: 6.9; 2011 (Proj.): 3.3; 2012 (Proj.): 3.7
- Import volume (annual change): 2006: 5.1; 2007: 5.5; 2008: 1.3; 2009: -14.9; 2010: 13.9; 2011 (Proj.): 7.5; 2012 (Proj.): 4.6
- Gross national saving (percent of GDP): 2006: 24.4; 2007: 24.1; 2008: 23.6; 2009: 17.9; 2010: 19.1; 2011 (Proj.): 19.9; 2012 (Proj.): 20.4

- Selected external and fiscal indicators
  - Trade surplus close to 6 percent of GDP in 2000–01.
  - Between 2000 and 2007, merchandise exports excluding energy grew at an average annual rate of 0.4 percent.
  - Non-energy export volumes are more than 10 percent below 2000 levels.
  - Total merchandise exports are about 6 percent lower than a decade ago.
  - Since 2000, Canada’s market share of U.S. imports has dropped by 40–50 percent in key sectors such as machinery, transportation, and manufacturing goods.
  - Canadian dollar some 10 percent above its 1980–2011 average as of end-October.
  - Current account deficit exceeds 3 percent of GDP.
  - Net external liabilities some 12 percent of GDP as of 2011Q2.
  - Gross external debt 67 percent of GDP as of 2011Q2.

- General government financials (percent of GDP) — GG Financial Assets and Liabilities, 2007-10 (listed in source table):
  - Gross GG debt: 66.5, 71.1, 83.6, 85.1
  - Financial assets: 43.6, 48.8, 55.3, 54.6
  - Government claims: 14.0, 17.5, 22.3, 21.9
  - Cash and deposits: 2.1, 3.6, 2.8, 2.1
  - Securities: 6.3, 6.1, 6.1, 6.4
  - Loans: 3.6, 3.6, 3.8, 3.9
  - Shares: 6.4, 4.0, 5.1, 5.6
  - Other 1/: 11.2, 13.9, 15.1, 14.8
  - Net GG debt: 22.9, 24.4, 28.3, 30.4

### POLICY RECOMMENDATIONS AND CONTINGENCY GUIDANCE
- First-line responses if recovery falters:
  - Full operation of automatic fiscal stabilizers and a reduction in the monetary policy rate should be first-line responses.
  - If domestic demand weakens materially, some space exists to loosen fiscal stance relative to plans; a temporary stimulus would be appropriate in a major downside scenario while maintaining medium-term consolidation plans.

- Macro-prudential and supervisory actions:
  - Continue tight supervision and conservative underwriting standards.
  - Consider additional macro-prudential measures if household debt and house prices rise further.
  - Undertake review of CMHC governance and supervision.

- Fiscal transparency and sustainability:
  - Provide further specificity on provincial expenditure-restraint measures.
  - Regular comprehensive fiscal sustainability reporting for all levels of government recommended.

*International Monetary Fund staff summary of the 2011 Canada Article IV mission (content unit _cr11364).*

### 2011. The team comprised Gian Maria Milesi-Ferretti (head), Oya

### CANADA 2011 ARTICLE IV REPORT

### RECENT DEVELOPMENTS AND OUTLOOK — Context and Current Conjuncture
- Recovery and growth
  - The Canadian economy recovered strongly in 2010; GDP returned to pre-crisis levels in Q3 2010.
  - The economy expanded well above its potential rate in 2010.
  - Unemployment declined from its 2009 peak but remained above 2008 levels.

- Labor market and wages
  - Total employment expanded by about 1½ percent relative to 2008.
  - Unemployment fell from 8¾ percent in August 2009 to 7.3 percent in October 2011.
  - Estimated long-run NAIRU is around 6 percent.
  - Manufacturing employment remains 10 percent below 2008 levels.
  - Wage growth was modest, with no real gains in the first half of 2011 relative to the same period in 2010.

- Household debt, housing, and consumption
  - Household debt stood at close to 150 percent of disposable income.
  - Private consumption growth decelerated markedly in the first half of 2011.
  - Mortgage growth moderated to 6.7 percent (s.a.a.r.) in August of 2011 following macro-prudential tightening since 2008.
  - Residential investment decelerated sharply in Q2 2011 after a prior-quarter surge.

- External sector and competitiveness
  - After a decade of surpluses, the current account balance shifted to a deficit of 3 percent of GDP in 2009–10.
  - Export volumes in 2010 remained below 2000 levels.
  - Foreign purchases of government and corporate debt securities were the main source of large net capital inflows.

- Inflation and monetary stance
  - Twelve-month headline inflation hovered around 3 percent; Bank of Canada control range is 1–3 percent.
  - Core inflation remained close to the 2 percent target.
  - The policy rate was kept constant at 1 percent since September 2010.

- Financial sector conditions
  - As of late November 2011, the stock market was some 10 percent lower relative to end-2010.
  - Credit to businesses rebounded to 6 percent y/y in Q3 2011.
  - The 3-month CAD Libor-OIS spread remained low; banks accessed funding at historically low rates.
  - Banking sector indicators:
    - Average returns on equity above 15 percent since 2010.
    - Nonperforming loans (NPLs) remained below 1.2 percent of total loans.
    - Provisioning ratios average 73 percent of NPLs for main financial institutions.
    - Tier 1 capital levels are above 13 percent under Basel II definitions.
    - Common equity ratios adjusted for Basel III deductions are above 7 percent.
  - Covered bond issuance by Canadian financial institutions reached C$40 billion by 2011.

### OUTLOOK AND RISKS
- Baseline projections
  - Staff projects growth to decelerate to around 2 percent on average in 2011 and 2012.
  - The current account deficit is projected to deteriorate to 3¾ percent of GDP in 2012.
  - The current account deficit is projected to remain around 3½ percent of GDP over the 2011–13 period.
  - Staff assesses the Canadian dollar to be on the strong side of medium-term fundamentals.

- Downside risks (tilted to the downside)
  - External shocks:
    - Weaker U.S. economy and distress in European debt markets could transmit via trade, financial, and confidence channels.
    - The U.S. accounts for over 70 percent of Canadian exports.
    - A large deterioration in terms of trade would widen the current account deficit; the 2011 current account evaluated at the 2005 terms of trade would show a deficit of 5¾ percent of GDP.
  - Lower commodity prices from weak activity in Europe, the United States, or a slowdown in emerging markets (notably China).
  - Domestic vulnerabilities:
    - High and rising household indebtedness and elevated housing prices.
    - A staff downside scenario: an external shock centered in Europe lowering world GDP by around 2 percent after two years relative to the WEO baseline, combined with a 15 percent decline in house prices and a severe downturn in construction activity, could result in a GDP decline of some 2½ percent over two years relative to the baseline.

### POLICY DISCUSSIONS — Monetary Policy
- Current stance and justification
  - Monetary policy remains highly supportive given the negative output gap and challenging global environment.
  - The Bank of Canada kept the policy rate at 1 percent since late 2010.
  - Staff concurs it is appropriate to keep the policy rate exceptionally low for some time, provided core inflation and inflation expectations remain quiescent.
  - Taylor-rule estimates also suggest the current monetary policy stance is appropriate.

- Contingency and tools
  - Authorities stand ready to respond quickly to a deterioration in the economic outlook or spillovers from global market turbulence.
  - Staff estimate: a 75 bps rate cut could raise growth by about 0.3 percentage point.
  - In a severe external shock, the Bank of Canada could deploy additional measures as during the 2008–09 crisis and quickly activate instruments to provide liquidity.
  - The US$30 billion swap facility with the U.S. Federal Reserve was extended in June 2011 through August 2012.

### POLICY DISCUSSIONS — Fiscal and Macroprudential Policy (summary of discussions)
- Fiscal policy
  - Given the advanced stage of the recovery, a still-large budget deficit, and long-term fiscal challenges, fiscal policy has moved toward tightening; the planned fiscal consolidation aims to raise domestic savings over the medium term.

- Macroprudential measures and household indebtedness
  - Further sustained increases in household debt and house prices would increase risks to macroeconomic stability.
  - If the recovery is accompanied by further sustained increases in mortgage debt as a share of disposable income spurred by low interest rates, a tightening of macro-prudential policies by the government may be needed.
  - Recent macro-prudential action: tightening of mortgage lending standards for government-backed insured mortgages since 2008, contributing to slower mortgage growth.

- Financial regulatory readiness
  - Authorities noted that, while banks have high liquidity, the Bank of Canada could provide liquidity instruments quickly should pressure arise from international financial stress.

*Source: IMF staff summary of the 2011 Canada Article IV mission (contents and excerpts provided in the supplied document).*

### 16.      The authorities noted that the

### _cr11364 - 16.      The authorities noted that the

### Inflation targeting and monetary policy stance
- The inflation targeting regime "Inflation-Control Target" has been renewed for a further five-year period.
- Authorities emphasized a credible and flexible approach: "monetary policy may in exceptional circumstances be used to support financial stability, including by varying the horizon over which inflation is expected to return to the target."
- Staff welcomed the renewal and "agreed with the authorities’ emphasis on a flexible approach that takes into account the evolution of risks to the outlook and financial stability."

### Fiscal policy: Path to a balanced budget over the medium term
- Fiscal consolidation is under way as policy stimulus is gradually removed.
- Federal government plans: a federal budget deficit reduction of some 1 percent of GDP in structural terms between 2010 and 2012, including by unwinding stimulus measures.
- Provincial and local governments: staff expects a broadly stable deficit in 2011 and some deficit reduction in 2012.
- Staff projections:
  - Reduction in the general government structural deficit of around 0.3 percent of GDP in 2011.
  - Reduction in the general government structural deficit of 0.8 percent of GDP in 2012.
  - The 0.8 percent of GDP consolidation "would imply a drag on economic growth of almost ½ percentage point."
- Policy flexibility in a deteriorating outlook:
  - First line of response: full operation of automatic fiscal stabilizers and a reduction in the monetary policy rate—particularly in the case of lower external demand.
  - If domestic demand weakens significantly, there is some space to further loosen the fiscal stance; temporary stimulus would be appropriate in a major downside scenario.
  - Any temporary stimulus should not derail identification of fiscal savings required for medium-term consolidation goals.
- Debt and consolidation goals:
  - General government gross debt expanded by almost 19 percentage points of GDP between 2007 and 2010, to 85 percent of GDP at end-2010.
  - Net debt rose to 30 percent of GDP.
  - Federal consolidation plan aims at a budgetary balance by 2015/16, relying on expiration of stimulus measures, bringing spending levels as share of GDP down to pre-crisis years, and higher revenues as the output gap closes.
  - Exceptional funding to Canada Mortgage Housing Corporation (CMHC) to purchase insured mortgages will be entirely repaid by 2014–15.
- Provinces:
  - Provincial governments have announced intentions to reach balanced budgets over the next several years; size and length of adjustments vary across provinces.
  - Most provinces do not intend to raise taxes; restraining operational spending growth will be critical.
  - Greater specificity on measures would enhance credibility.
- Long-term fiscal challenges:
  - Addressing rising health costs and ageing requires coordinated federal–regional efforts.
  - Review of federal transfers to provinces, to be completed by 2014/15, is an opportunity to progress.
  - Regular and comprehensive fiscal sustainability reporting covering all levels of government recommended.
  - Staff welcomed recent fiscal sustainability studies by the Parliamentary Budget Office (PBO).

### Household debt and housing prices: Managing the risks
- Authorities have adopted macro-prudential measures to rein in household debt.
- Key indicators:
  - Price-to-rent ratio is 29 percent above its average for the last decade.
  - Price-to-income ratio is 20 percent above its average for the last decade.
  - Staff estimates indicate an average price overvaluation of around 10 percent, with significant regional differences.
- Effects of measures and conditions:
  - Tightened mortgage insurance standards several times since 2008.
  - These measures and rising global uncertainty have reduced the pace of mortgage credit growth.
- Staff scenario and suggested measures:
  - A 15 percent decline in house prices would reduce the ratio of household net worth to disposable income by 45 percentage points, and could trigger a decline in private consumption by over 1½ percent.
  - Suggested macro-prudential options: larger down-payment requirements for new mortgages; requiring lower debt service-to-income ratios.
  - Targeted measures for specific provinces were discussed; authorities are not considering regulations differentiated across provinces.
  - Continued tight supervision to ensure conservative underwriting and adherence to existing regulations.
- CMHC considerations:
  - CMHC accounts for more than two-thirds of the mortgage insurance market and benefits from explicit government backing.
  - CMHC stress tests suggest insurance business is well positioned under severe scenarios; most significant risks stem from protracted high unemployment.
  - Staff estimates suggest losses to government net worth from higher CMHC insurance outlays would be relatively modest in a downside housing distress scenario, with fiscal deterioration arising mainly from worsened macroeconomic conditions.
  - Recommendation: undertake a review to ensure CMHC has a modern and effective governance structure and supervision, and assess scope to strengthen its risk management.

### Financial stability: Managing external risks and implementing regulatory reforms
- Overall resilience:
  - Canadian banking system withstood the international crisis well; banks are "well capitalized and have prudent management."
  - Authorities remain vigilant given high external and domestic risks.
- External spillovers:
  - Direct exposures of Canadian banks to Europe are estimated to be limited, but further turmoil could affect Canada via higher funding costs, asset re-pricing, and lower liquidity.
  - Importance of banks having appropriate liquidity buffers; buffers have increased recently.
  - Liquidity shortages could be alleviated by prompt and coordinated policy action, including central bank assistance as in 2008–09.
- Stress tests:
  - Authorities' stress-testing scenarios indicate manageable losses under adverse scenarios, partly reflecting a large share of mortgages insured by CMHC and private insurers.
  - Only a protracted period of high unemployment (around 10 percent or higher) would lead to significant losses in the financial sector.
  - Elevated household indebtedness increases household vulnerability to shocks.
- Corporate sector:
  - Corporate credit has accelerated, but firms have relatively low leverage and banks are not heavily exposed to sectors hit hardest by the crisis (e.g., auto).
- Low interest rate risks:
  - Prolonged low rates could encourage excessive borrowing and bank risk-taking; institutions with large fixed-income portfolios (insurance companies, pension funds) would be negatively affected.
  - Insurance firms: reallocated part of portfolios to non-fixed income securities, changed pricing strategies and product menus, and expanded abroad.
  - Pension funds with defined benefits may need to increase contributions or reassess benefits.
  - Banks: high capital and profitability help; persistently low rates could pressure margins and lead to business model changes. Expansion abroad poses supervisory challenges.
- International reform agenda:
  - Authorities proceeding with Basel III capital and liquidity requirements and published regulatory guidance relating to non-viability contingent capital and transition for non-qualifying instruments.
  - Expectation that Canadian banks should meet 2019 Basel III capital requirements early in the transition period starting on January 1, 2013.
  - Authorities consider the Assets to Capital Multiple (ACM) rule as having served Canada well and will consider whether changes are appropriate to simplify dual reporting and adapt to Basel III leverage ratio elements.
  - Adoption of liquidity standards (LCR and NSFR) may be more challenging; authorities endorse both but prefer to await completion of an observation period before revising domestic regulations.
  - Implementation of NSFR likely requires banks to gradually increase retail deposit funding.
  - Authorities agreed in principle to an FSAP-Update penciled in for 2013.
  - Continued strengthening of AML/CFT compliance, including customer due diligence.
- Securities regulation and CCPs:
  - Commitment to keep national securities regulator adoption on track; draft proposal referred to the Supreme Court and decision pending.
  - Transitional office harmonizing provincial rules; expectation to launch national regulator in 2012 with most provinces joining.
  - Progress toward establishment of a CCP for repo markets is on track to reduce counterparty risk and enhance transparency.
  - For OTC derivatives, authorities evaluating global clearing houses as an alternative to domestic CCPs; noted potential access challenges for mid-sized institutions and higher systemic risk implications.
- Recovery and resolution planning:
  - Substantial progress on recovery and orderly resolution plans for largest banks.
  - A large Canadian bank selected in 2009 to develop "living will" documents; remaining large banks included subsequently and resolution plans are being modified based on findings.

### External competitiveness
- Section heading present; no substantive content in this excerpt.

*International Monetary Fund staff summary of "CANADA 2011 ARTICLE IV REPORT" content unit*

### 30.      A key structural challenge for

### _cr11364 - 30.      A key structural challenge for

### Export performance and structural constraints
- Canada must strengthen export performance after a weak decade; export growth had been weak for over a decade and the 2008 crisis triggered a sharp deterioration in the external trade balance.
- Authorities’ diagnosis of weak exports:
  - Exchange rate appreciation constrained export growth.
  - Lagging productivity growth.
  - Increased competition from emerging economies in the U.S. market.
- Manufacturing sector observations:
  - Undergoing an adjustment period, becoming better prepared to face the new competitive environment and stronger currency.
- Factors expected to support export recovery:
  - Robust business investment to strengthen labor productivity and competitiveness.
  - Recovery in the U.S., particularly in sectors severely affected by the crisis such as autos and housing.
  - Large investment projects in energy and mining, though some face legal and environmental challenges.
- Policy actions to diversify and boost exports:
  - Government engaged in reaching new bilateral trade agreements given slow progress in multilateral trade discussions.
  - Ongoing review of government strategy toward improving business R&D, where Canada lags main trade partners.

### Staff appraisal — near-term outlook and risks
- Post-crisis recovery and moderation:
  - After a strong recovery, growth in Canada is moderating following expansion well above potential in 2010.
  - A substantially weaker and more uncertain external environment has reduced short-run growth prospects.
- Key challenges:
  - Unwinding exceptional policy support at the right pace in a more adverse external environment.
  - Domestic private sector expected to drive growth as fiscal consolidation takes hold and foreign demand remains weak.
- Macroeconomic vulnerabilities and downside risks:
  - Investment expected to remain buoyant; private consumption outlook clouded by rising household indebtedness and fragile consumer confidence.
  - Important downside risks include external headwinds from financial market turmoil in Europe; a weaker U.S. economy; and lower commodity prices under a scenario of weaker global activity.
  - Domestic impact of significant adverse external shocks could be amplified by elevated household debt and house prices.

### Monetary policy stance
- With modest core inflation, well-anchored inflation expectations, and ongoing economic slack:
  - An accommodative monetary policy stance will likely remain appropriate for some time.
  - Some space exists for further monetary easing if the economy were to weaken.
  - Bank of Canada prepared to quickly respond to liquidity strains by redeploying crisis-era tools.
  - Staff welcomes renewal of the inflation-targeting framework and its flexible implementation.

### Fiscal policy and consolidation
- Fiscal stance:
  - Fiscal policy appropriately shifting toward consolidation after an effective stimulus program.
  - Federal government leading initial fiscal effort; spending being brought to pre-crisis levels as a share of GDP.
  - Provincial governments urged to move ahead with their own fiscal consolidation efforts given their large share of public spending and fiscal deficit.
- Structural deficit and medium-term objectives:
  - Projected reduction in the general government structural deficit in 2012 is appropriate under baseline scenario of resilient domestic demand and a somewhat higher external current account deficit.
  - Staff supports authorities’ objective of returning to a stronger fiscal position in the medium term to place gross and net public debt on a declining path relative to GDP.
  - Provinces’ consolidation plans rely heavily on expenditure restraint; further specificity on measures would enhance transparency and credibility.
- Long-term fiscal challenges:
  - Concerted federal-provincial effort needed to deal with rising health costs in an ageing society.
  - Review of transfers of the federal government to the provinces to be completed by 2014/15 is an opportunity.
  - Regular and comprehensive fiscal sustainability reporting covering all levels of government recommended.
  - Recent long-term fiscal sustainability studies prepared by the PBO noted as an important first step.

### Macro-prudential policy, housing, and CMHC
- Housing and household debt:
  - Authorities have adopted macro-prudential measures to curb mortgage debt build-up.
  - Household debt at an historical high relative to disposable income; indicators suggest house prices in some regions above levels consistent with fundamentals.
  - Measures taken: increased public awareness of risks and tightened mortgage insurance standards; mortgage credit growth slowed.
- Potential need for additional measures:
  - Additional macro-prudential measures may be needed if household debt and house prices increase further and sustainably, with attention to the overall cyclical position.
  - Continued tight supervision of financial institutions necessary to ensure conservative underwriting standards and adherence to regulations.
- CMHC review:
  - Recommended review of Canada Mortgage Housing Corporation (CMHC) governance structure and supervision given its role as housing sector backstop and its size as one of the largest financial institutions in Canada.
  - Elevated house prices and household debt and potential fiscal risks associated with CMHC’s balance sheet in stress scenarios make a review timely.

### Financial sector resilience and reforms
- Banking sector resilience:
  - Canadian banking sector well supervised, well capitalized, and in a solid position to manage risks.
  - Authorities maintain high prudential standards and tight supervision; stress tests indicate banks are well prepared for most adverse scenarios given high capital levels.
  - Main risk to the financial system is a sharp and prolonged increase in unemployment.
  - Potential stress channel in increased international turbulence: reduced access to wholesale funding — highlights need for prudent liquidity buffers.
  - Institutional arrangements supportive of coordinated responses, as shown during the crisis.
- Low interest rate environment risks:
  - Prolonged low interest rates require close monitoring for negative effects on financial institutions and excessive risk taking.
  - Could encourage excessive borrowing by economic agents and risk-taking by banks; insurance sector and pension funds would face challenges if low rates persist.
- Financial reform agenda:
  - Authorities committed to swift adoption of Basel III capital and liquidity requirements.
  - Progress welcomed on recovery and orderly resolution plans for Canada’s largest banks.
  - Progress on central counterparty for repo markets and OTC derivatives noted.
  - Government intention to launch a national securities regulator in 2012 welcomed.

### Policy recommendations and contingency guidance
- First-line responses if recovery falters:
  - Full operation of automatic fiscal stabilizers and a reduction in the monetary policy rate should be first-line responses.
  - If domestic demand weakens materially, some space exists to loosen fiscal stance relative to plans; a temporary stimulus would be appropriate in a major downside scenario while maintaining medium-term consolidation plans.
- Macro-prudential and supervisory actions:
  - Continue tight supervision and conservative underwriting standards.
  - Consider additional macro-prudential measures if household debt and house prices rise further.
  - Undertake review of CMHC governance and supervision.
- Fiscal transparency and sustainability:
  - Provide further specificity on provincial expenditure-restraint measures.
  - Regular comprehensive fiscal sustainability reporting for all levels of government recommended.

### Key statistics and empirical findings (preserved exactly from source)
- External and competitiveness indicators:
  - Trade surplus close to 6 percent of GDP in 2000–01.
  - Between 2000 and 2007, merchandise exports excluding energy grew at an average annual rate of 0.4 percent.
  - Non-energy export volumes are more than 10 percent below 2000 levels.
  - Total merchandise exports are about 6 percent lower than a decade ago.
  - Since 2000, Canada’s market share of U.S. imports has dropped by 40–50 percent in key sectors such as machinery, transportation, and manufacturing goods.
- Exchange rate and external positions:
  - Canadian dollar some 10 percent above its 1980–2011 average as of end-October.
  - Current account deficit exceeds 3 percent of GDP.
  - Net external liabilities some 12 percent of GDP as of 2011Q2.
  - Gross external debt 67 percent of GDP as of 2011Q2.
  - CGER quantitative estimates (WEO reference period of July–August 2011): Macroeconomic Balance approach 9 percent above equilibrium; Equilibrium Real Exchange Rate approach 8 percent above equilibrium; External Sustainability approach 4 percent above equilibrium.
- General government debt and assets (selected figures):
  - At end-2010, gross debt of the general government (GG) amounted to 85 percent of GDP; net debt amounted to 30 percent.
  - From 2007–10, gross debt of the GG rose by almost 20 percentage points; net debt rose by 7 percentage points.
  - These claims (government claims on Crown corporations) account for 40 percent of total GG financial assets.
  - Federal gross debt reached 41¼ percent of GDP in 2010; net debt was 25½ percent of GDP.
  - Government loans to the CMHC represent about 30 of its total financial assets (note: figure as in source).
  - Provinces’ gross debt amounted to 52 percent of GDP in 2010; net debt was 16 percent of GDP.
  - Canada: GG Financial Assets and Liabilities, 2007-10 (percent of GDP) listed in source table:
    - Gross GG debt: 66.5, 71.1, 83.6, 85.1
    - Financial assets: 43.6, 48.8, 55.3, 54.6
    - Government claims: 14.0, 17.5, 22.3, 21.9
    - Cash and deposits: 2.1, 3.6, 2.8, 2.1
    - Securities: 6.3, 6.1, 6.1, 6.4
    - Loans: 3.6, 3.6, 3.8, 3.9
    - Shares: 6.4, 4.0, 5.1, 5.6
    - Other 1/: 11.2, 13.9, 15.1, 14.8
    - Net GG debt: 22.9, 24.4, 28.3, 30.4
- Policy timing:
  - Review of federal transfers to provinces must be completed by 2014/15.
  - Next consultation recommended on the usual 12-month cycle.

*International Monetary Fund — 2011 Article IV Report: Canada (excerpt from content unit _cr11364 - 30.      A key structural challenge for)*

### Box 4. Rising Health Care Spending Pressures

### Box 4. Rising Health Care Spending Pressures

### Structure of the Canadian Health Care System
- The health care system in Canada is predominantly publicly-financed and decentralized to the provinces.
- Public health care expenditures represent about 70 percent of total health expenditures.
- The cash component of the “Canada Health Transfer” from the federal government to the provinces and territories finances about 20 percent of provincial public health spending.

### Recent and Drivers of Spending Growth
- Public health care expenditures are estimated to have increased to around 8½ percent of GDP in 2009–10.
- Health expenditures have increased rapidly in the 2000s mainly reflecting:
  - high health care inflation (due in part to rising earnings of health care professionals),
  - technological changes (which contributed to rising hospital and prescription drug costs),
  - and to a lesser degree demographic factors (ageing).

### Fiscal Challenge and Provincial Impact
- The rise in public health expenditures is the most important long-term fiscal challenge faced by Canada, as in other advanced economies.
- The share of health spending in provincial budgets has been steadily rising and accounts for close to 40 percent of total program spending.

### Parliamentary Budget Office (PBO) Projections and Scenarios
- The PBO projects that health and other ageing-related expenditures will rise substantially over the next decades as a consequence of health care inflation and as the effects of population ageing intensify.
- Ageing contribution to public health spending growth:
  - would rise from 0.9 percentage points in 2010 to 1.2 percentage points by 2032,
  - and decline gradually after that.
- Even abstracting from ageing, the PBO assumes that health spending would grow faster than nominal GDP (0.4 percent a year, in line with the 1976–2010 average).
- Under these assumptions, public health expenditures would reach:
  - 13 percent of GDP around 2050,
  - and 15 percent of GDP by 2085.
- In addition, annual federal elderly benefits are projected to rise by 1 percent of GDP by 2035/36 under the PBO study.

### Fiscal Implications
- The pressures from health and other ageing-related spending would lead to a substantial increase in the deficit and public debt over the long term if no compensatory spending or revenue measures were taken.

*Source: Box 4. Rising Health Care Spending Pressures, _cr11364 - Box 4. Rising Health Care Spending Pressures_*

### 1. This note reports on information that has become available after the staff report

### _cr11364 - 1. This note reports on information that has become available after the staff report

### Recent economic developments
- Real GDP grew by 3½ percent (s.a.a.r.) in Q3, after a small contraction in the previous quarter due to one-off factors.
- Q3 growth reflected a strong rebound in net exports, while growth of final domestic demand weakened.
- Canada’s current account deficit declined to 2.8 percent of GDP in the third quarter.
- External trade remains volatile: exports fell by 3 percent in October, partially reversing earlier improvement.
- Inflation:
  - Inflation fell slightly in October.
  - Core inflation remained around the Bank of Canada’s 2 percent target.
- Labor market and activity surveys:
  - Unemployment rose to 7.4 percent in November.
  - Recent activity surveys (October and November manufacturing PMI) suggest the economy is decelerating.
- Fiscal outturn for Q3:
  - General government fiscal deficit is broadly in line with staff projections.

### Monetary and financial policy actions and risks
- Bank of Canada actions:
  - On December 6, the Bank of Canada left the overnight rate unchanged at 1 percent.
  - The Bank noted the weaker external outlook was expected to damp GDP growth through financial, confidence, and trade channels.
  - Inflationary pressures in the quarters ahead are expected to remain subdued given existing slack.
- International coordinated central bank actions (November 30):
  - The Bank of Canada, Bank of England, Bank of Japan, European Central Bank, Federal Reserve, and Swiss National Bank agreed to lower pricing on existing temporary U.S. dollar liquidity swap arrangements by 50 basis points.
  - These swap arrangements have been extended to February 1, 2013.
  - As a contingency measure, the central banks agreed to establish temporary bilateral liquidity swap arrangements to provide liquidity in each jurisdiction, in any of their currencies, if market conditions warrant.
- Bank of Canada Financial System Review:
  - Noted that risks to Canada’s financial system have increased over the last six months, mainly due to the external environment.
- Financial conditions:
  - Credit conditions remain highly favorable despite some recent tightening, with firms and banks benefiting from funding costs well below historical averages.
  - Banks’ financial soundness indicators are at strong levels, with near-term risks primarily from potential spillovers from European markets.

### IMF Executive Board assessment and policy recommendations
- Overall appraisal:
  - Executive Directors commended the authorities’ macroeconomic management and financial sector oversight.
  - Directors noted the pace of recovery has slowed after a strong rebound in 2010; near-term downside risks are high due to European financial market turmoil and rising household indebtedness.
- Monetary policy guidance:
  - Directors endorsed the Bank of Canada’s conduct of monetary policy and agreed it should remain accommodative given prevailing slack and core inflation within target.
  - Most Directors saw scope for further monetary easing if the economy weakens.
  - Directors welcomed the Bank’s preparedness to respond quickly to liquidity strains.
- Fiscal policy guidance:
  - Directors supported the authorities’ intention to gradually remove fiscal stimulus and return to fiscal balance over the medium term.
  - Provincial governments were urged to move ahead with fiscal consolidation.
  - Most Directors agreed there is space for countercyclical fiscal support within medium-term consolidation plans if the outlook deteriorates, given the low level of government net debt.
- Macroprudential and housing policy:
  - Directors welcomed macroprudential measures to curb mortgage debt build-up and called for continued vigilance given household debt at a historical high.
  - Strengthening oversight of the Canadian Mortgage and Housing Corporation was highlighted as particularly important.
  - Authorities were commended for willingness to take additional action should prices and household indebtedness continue to rise.
- Structural and long-term recommendations:
  - Directors highlighted a gradual loss of external competitiveness and stressed reversing this trend through improving the business environment and boosting productivity.
  - Directors stressed the need for concerted effort to contain rising health care costs associated with population aging; the forthcoming review of federal transfers to provinces was noted as an opportunity.

### Outlook and risks
- Near-term growth outlook:
  - Economic growth is expected to be moderate in the near term, with significant uncertainty from the unsettled external environment.
  - While interest rates remain low, personal consumption and real estate investment growth is expected to be relatively subdued due to high household debt and measures to contain mortgage credit growth.
  - Business investment is anticipated to play a key role in sustaining growth amid weak net exports and ongoing fiscal adjustment.
- Main risks:
  - External: further turbulence from Europe and its impact on global financial markets.
  - Domestic: high household debt levels and elevated house prices.

### Key statistics and projections (as reported)
- Real GDP (annual change): 2006: 2.8; 2007: 2.2; 2008: 0.7; 2009: -2.8; 2010: 3.2; 2011 (Proj.): 2.2; 2012 (Proj.): 1.9
- Net exports (contribution to growth): 2006: -1.4; 2007: -1.5; 2008: -2.1; 2009: 0.2; 2010: -2.1; 2011 (Proj.): -1.3; 2012 (Proj.): -0.2
- Final domestic demand (annual change): 2006: 4.6; 2007: 4.0; 2008: 3.0; 2009: -2.1; 2010: 4.5; 2011 (Proj.): 2.9; 2012 (Proj.): 1.8
- Private consumption (annual change): 2006: 4.2; 2007: 4.6; 2008: 3.0; 2009: 0.4; 2010: 3.3; 2011 (Proj.): 1.9; 2012 (Proj.): 1.6
- Private fixed domestic investment (annual change): 2006: 7.1; 2007: 3.1; 2008: 1.2; 2009: -16.6; 2010: 8.4; 2011 (Proj.): 9.3; 2012 (Proj.): 5.3
- Private investment rate (percent of GDP): 2006: 20.5; 2007: 20.7; 2008: 20.8; 2009: 17.9; 2010: 18.8; 2011 (Proj.): 20.1; 2012 (Proj.): 20.7
- Unemployment rate: 2006: 6.3; 2007: 6.1; 2008: 6.2; 2009: 8.3; 2010: 8.0; 2011 (Proj.): 7.4; 2012 (Proj.): 7.2
- Consumer price index (annual change): 2006: 2.0; 2007: 2.1; 2008: 2.4; 2009: 0.3; 2010: 1.8; 2011 (Proj.): 2.9; 2012 (Proj.): 2.0
- Federal fiscal balance (percent of GDP): 2006: 0.8; 2007: 1.0; 2008: 0.2; 2009: -2.2; 2010: -2.6; 2011 (Proj.): -1.9; 2012 (Proj.): -1.5
- Provincial fiscal balance (percent of GDP): 2006: 0.0; 2007: -0.4; 2008: -1.0; 2009: -3.5; 2010: -3.5; 2011 (Proj.): -3.5; 2012 (Proj.): -3.1
- General government fiscal balance (percent of GDP): 2006: 1.6; 2007: 1.6; 2008: 0.1; 2009: -4.9; 2010: -5.6; 2011 (Proj.): -4.8; 2012 (Proj.): -4.0
- Three-month treasury bill: 2006: 4.0; 2007: 4.2; 2008: 2.4; 2009: 0.4; 2010: 0.6; 2011 (Proj.): 0.9; 2012 (Proj.): 1.0
- Ten-year government bond yield: 2006: 4.2; 2007: 4.3; 2008: 3.6; 2009: 3.2; 2010: 3.2; 2011 (Proj.): 2.8; 2012 (Proj.): 2.5
- Current account balance (percent of GDP): 2006: 1.4; 2007: 0.8; 2008: 0.3; 2009: -3.0; 2010: -3.1; 2011 (Proj.): -3.5; 2012 (Proj.): -3.8
- Merchandise trade balance (percent of GDP): 2006: 3.4; 2007: 3.1; 2008: 2.8; 2009: -0.3; 2010: -0.6; 2011 (Proj.): -0.7; 2012 (Proj.): -1.0
- Export volume (annual change): 2006: 0.8; 2007: 1.3; 2008: -5.3; 2009: -15.0; 2010: 6.9; 2011 (Proj.): 3.3; 2012 (Proj.): 3.7
- Import volume (annual change): 2006: 5.1; 2007: 5.5; 2008: 1.3; 2009: -14.9; 2010: 13.9; 2011 (Proj.): 7.5; 2012 (Proj.): 4.6
- Gross national saving (percent of GDP): 2006: 24.4; 2007: 24.1; 2008: 23.6; 2009: 17.9; 2010: 19.1; 2011 (Proj.): 19.9; 2012 (Proj.): 20.4

*Source: _cr11364 - 1. This note (information available after the staff report) and IMF Public Information Notice No. 11/160 (December 22, 2011).*

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