Canadians will endure a deep and painful recession but one that will be relatively short-lived, with a bounce-back starting as early as this summer, the Bank of Canada says.
The central bank's outlook also projects a robust 3.8 percent growth next year.
"The anticipated normalization of financial conditions, together with the stimulus coming from monetary and fiscal policies, should boost the growth of consumer spending in 2010," the bank said.
Helping to lift the economy out of the recession will be the "substantial" fiscal stimulus and improved credit and equity markets, bank governor Mark Carney said.
The Canadian government is expected to announce about $16-billion (U.S.) in stimulus for infrastructure construction spending and tax cuts in its budget Tuesday.
"Canadian credit conditions remain better than those in other major countries," the bank said, suggesting this economic recovery will be faster than those from the 1981-82 and 1990-92 recessions.
To boost the economy, the bank slashed its key interest rate by 0.5 percent to 1 percent — the lowest in history — while the prime lending rate dropped by a similar amount to 3 percent.
Speaker refused entry
William Ayers, the former U.S. radical whom Republicans linked to President Obama during the election campaign, was refused entry to Canada last weekend.
Ayers was to deliver a speech to the University of Toronto's Center for Urban Schooling, but was turned away because of his 1969 criminal conviction over an antiwar demonstration.
Center officials said they were surprised that Ayers, a professor, community organizer and author, would be deemed a threat by Canadian border security.
News in brief
• Three hundred Quebec workers will lose their jobs within six months as Rio Tinto Alcan closes its Beauharnois smelter and reduces work at the Vaudreuil alumina refinery. Lower aluminum prices and a declining economy are blamed.
• Two Alberta men who assisted a man who later killed four Mounties in 2005 will be sentenced Friday for manslaughter. Shawn Hennessey and his brother-in-law, Dennis Cheeseman, admitted their involvement with James Roszko, who shot the officers and killed himself when they investigated a marijuana-growing operation at his farm near Mayerthorpe.
• A business trip to Toronto by Seattle businessman Sean Mayer paid off as he won $6-million (U.S.) in the Jan. 3 Lotto 6/49 draw. "We wish we were Canadian so we didn't have to pay the taxes," his wife, Joni, joked. Lottery winnings are tax free for Canadians, while Mayer will have to hand over more than $2-million in U.S. taxes.
Facts and figures
Canada's inflation rate of 1.2 percent in December, down from 2 percent, was the lowest in two years and largely due to a 26 percent drop in gas prices.
The Canadian dollar is higher at 81.14 U.S. cents, while the U.S. greenback returns $1.2325 Canadian, before bank exchange fees.
The Bank of Canada interest rate dropped to 1 percent and the prime lending rate is 3 percent.
Canadian stock exchanges are lower, with the Toronto composite index at 8,660 points and the TSX Venture exchange at 851 points.
Lotto 6-49: (Wednesday) 8, 32, 34, 39, 43 and 48; bonus 25. (Jan. 17) 8, 12, 20, 28, 39 and 47; bonus 10. Super 7: (Jan. 16) 9, 11, 15, 16, 31, 39 and 47; bonus 12.
• Ontario Premier Dalton McGuinty said he wants a mediator to "bang heads together" to end the 12-week-old strike affecting 50,000 students at York University in Toronto. Casual faculty and teaching and graduate assistants rejected an offer of a 10.7-percent raise over three years. In Ottawa, transit workers have been on strike for almost seven weeks.
• Job cuts in Atlantic Canada include 302 workers from the closing of ACA Co-operative's Eastern Protein Foods poultry-processing plant in Kentville and a reduction in production in New Minas, Nova Scotia. In New Brunswick, Atlantic Yarns in Atholville and Atlantic Fine Yarns in Pokemouche are closing with the loss of 360 jobs.
• The death toll from Western Canada avalanches has risen to 15 with the death last weekend of a snowmobiler near Tumbler Ridge in British Columbia. A day earlier an avalanche in the Monashee Mountains near Valemount buried two snowmobilers, killing a man from Edmonton.
• A baby playing with a telephone accidentally called 911 and brought police to his dad's marijuana-growing operation. When Mounties investigated the call in White Rock, British Columbia, they found an 11-month-old boy still holding the phone, and his father's 500 pot plants.
Jim Fox can be reached at email@example.com.