(The Canadian Press) OTTAWA _ The International Monetary Fund is advising Canadian policy-makers against pulling too hard on the reins of austerity while the economy remains weak and risks prevail.
The IMF says in a new forecast that Canada's economy will slow to about 1.5% this year before picking up to 2.4% in 2014, so policy-makers need to support growth in the short term.
It recommends that Ottawa allow support programs such as employment insurance to operate at full capacity if the economy deteriorates.
The IMF also advises the Bank of Canada to maintain its current low-interest rate setting and only begin to move to tighten rates when growth strengthens again.
Going forward, it says the economy will continue to be held back by high household debt levels and a cooling housing market.
And it says while modest, the economy could perform even worse should circumstances deteriorate in Europe, the United States recovery stalls or if there is a decline in global commodity prices.