Business

Canadian recovery depends on global efforts: Carney

Any economic recovery in Canada hinges on efforts around the world to bolster the financial sector, Bank of Canada governor Mark Carney said Tuesday.

Any economic recovery in Canada hinges on efforts around the world to bolster the financial sector, Bank of Canada governor Mark Carney said Tuesday.

Speaking in Ottawa to the House of Commons standing committee on finance, Carney said "extraordinary steps" have been taken by all G7 countries to keep banks from collapsing.

"The task is far from complete," he said. "Decisions taken in the coming weeks in the United States and in other major economies to isolate toxic assets in order to create a core of 'good' banks will be critical."

Details on the U.S. government's plans for restructuring its financial sector were to be released later Tuesday morning by U.S. Treasury Secretary Tim Geithner.

In his statement to the finance committee, Carney also stuck to the economic outlook the central bank released at the end of January. That outlook predicts the current recession will be sharp and deep, with a contraction in the country's gross domestic product in 2009 of 1.2 per cent.

Carney reiterated his view that the economy will rebound in 2010, with the central bank still projecting real GDP growth of 2.8 per cent.

"Though seemingly impressive when viewed from the depths of a recession, such a recovery is actually more muted than usual," he said.

Carney did caution that the bank's outlook is subject "to a high degree of uncertainty."

"As we have consistently emphasized, stabilization of the global financial system is a precondition for economic recovery globally and in Canada," he said.

Questioned by some MPs on the committee over the suggestion that the central bank's outlook is too optimistic, Carney responded: "We don't do optimism; we don't do pessimism; we do realism at the Bank of Canada. We don't do spin."

now