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A Thaw In Canada's Economic Freeze


Economic Trends

A THAW IN CANADA'S ECONOMIC FREEZE

The U.S. isn't the only country to enjoy a productivity-led recovery. Canada, which suffered a deeper recession, has been posting a sharp 3.7% annual rise in output per hour since late 1990. In addition, exports surged 9.6% last year, and inflation fell to a mere 1.5%. The upshot, says the Organization for Economic Cooperation & Development, is that Canada should post 3.2% growth this year, more than any other Group of Seven nation.

The flip side of this rosy picture is the severity of Canada's current employment and budgetary problems. Not only is its unemployment rate, at 11%, far higher than that of the U.S., but its debt burden seems even more intractable. The federal and provincial governments combined are heading toward a record $45 billion deficit in the current fiscal year, pushing total government debt to some 90% of GDP--second only to Italy among G-7 nations. And with Canada's huge external borrowings, this burden is putting upward pressure on interest rates.

For now, the hope is that rising demand for Canadian products generated by the U.S. expansion will accelerate Canada's upturn and temper its employment and debt woes. Over the long run, though, observers believe Canadians will have to bite the bullet and curb some popular social programs to put their fiscal house in order.GENE KORETZ With William C. Symonds in Toronto


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