The Canadian economy continues to perform robustly, the IMF said in a twice-yearly snapshot of the world economy, but it warned that another risk would be the possibility of a sharper-than-expected U.S. slowdown.
More than $1 billion in goods are traded between the neighbours each day, making it the world's biggest bilateral trade flow. But the Canadian dollar's rise in the past few years has curbed factory exports while the value of energy shipments has jumped.
The Canadian dollar has soared from an all-time low of just under 62 U.S. cents in January 2002. An internal note in March by the Bank of Canada said the long-term equilibrium value is 91 U.S. cents.
''A strong fiscal position remains at the center of the new government's economic policies, with the fiscal year 2006/07 budget including welcome commitments to lower public debt, contain expenditure growth and reduce the tax burden on the corporate sector,'' the IMF said.
It left Canadian growth projections unchanged from April's forecasts of 3.1 percent for 2006 and 3.0 percent for 2007. Two weeks ago Canada reported a sharp slowdown in second-quarter annualized growth to 2.0 percent from 3.6 percent in the first three months of the year.
Inflation should be 2.2 percent this year and 1.9 percent in 2007, the lender said, but that contrasted with the central bank's July outlook of inflation averaging 1.5 percent to mid-2007.
REUTERS VJ PM0815