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CIBC shines hopeful light on economy

Amber

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OTTAWA -- Grey economic skies are going to clear up a lot quicker than you think, according to a CIBC economic report released Thursday that takes issue with predictions that Canada`s recovery from the recession will be long and arduous. Canada is in a far better economic position in 2009 than it was in 1993, when its debt and interest servicing costs led the Wall Street Journal to liken it to a Third World country, say CIBC economists Avery Shenfeld and Warren Lovely.

"Canada`s fiscal standing is hardly at risk," said Mr. Shenfeld and Mr. Lovely in the report, and point out that because the pace of economic growth was underestimated following the recession in the early 1990s, the projections for recovery were "wildly off the mark" -- Canada took just three years to turn its $37.5-billion deficit into a $3-billion surplus "as the business cycle swung to expansion and a `jobless` recovery eventually gave way to more serious hiring and income growth."

Factors such as the debt-reduction program undertaken as Ottawa posted successive record surpluses, which mean that less of the country`s revenue is spent servicing the debt, and the "one-off" nature of the stimulus packages offered by the federal government will encourage Canada`s quick economic recovery, the economists wrote.

In addition, the two predict that rising commodity prices will also boost federal coffers, though they warn that recovery won`t be immediate.




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