Canada doesn’t need a U.S.-style fiscal stimulus package just yet, say economists at Global Insight Inc.

Last week, U.S. president Bush proposed fiscal policy measures directed at avoiding a recession in that country.

Global Insight’s economists support a fiscal stimulus package of about 1% of GDP in the U.S., “if it is quick, cost effective, and temporary”. However, they place the probability of a successful effort at just over 50/50.

The firm says it has considered whether Canada needs similar measures, and it advises against them, at least for now. The Canadian economy is expected to hold up better than the U.S., the firm maintains. It assesses the probability of recession in the U.S. to be rising towards 50%, while in Canada it is in the 25% range.

“There will likely be several more quarters of weak growth in the United States. Canada’s weakest quarter is probably already behind us, and by the third quarter of this year, the Canadian economy is expected to be moving along reasonably well,” it adds.

“Further complicating the situation in Canada is that the current weakness, along with the downside risk, is not widespread, it is very centralized on Ontario,” Global Insight says.

Moreover, the firm maintains that cutting taxes or boosting spending to avoid an impending recession sounds like a good idea in theory, but very often turns out to be a failure when implemented in the real world. “Plans to cut taxes and/or increase spending to avoid a forecast recession often end up taking too long to implement, not having sufficient ‘bang for the buck’, and/or being off target,” it says. There is also a definite downside risk at attempting countercyclical fiscal policy, it says, namely that it may fuel inflation.

The time for an effort at countercyclical fiscal policy may yet come, the firm allows. “If we are most certainly in a recession, which most certainly appears to be with us for several more quarters in spite of the best efforts of monetary policy,” then it may be worth considering a temporary fiscal stimulus package, it says, even though such measures may not get the job done.

Currently however, it concludes, “The time for a fiscal stimulus package for Canada has not yet arrived, and hopefully it never will.”