Canada’s gross domestic product grew 2.8% in 2004, and should do the same in 2005, creeping up to 3.0% in 2006, the International Monetary Fund says.

“The economy is expected to maintain its momentum in 2005 underpinned by strong gains in employment and solid corporate earnings,” it says.

“With signs of shrinking economic slack, the Bank of Canada began to gradually withdraw stimulus in the fall, but has paused more recently in response to the currency’s appreciation and little sign of inflation and wage pressures,” it notes. “A measured and patient pace of tightening remains appropriate in this context.”

“Fiscal policy has contributed to maintaining the sound macroeconomic performance, with the general government running a significant surplus,” it adds. “In light of the implications of changing demographics, the government’s ongoing plan to reduce debt ratios is appropriately ambitious, but priority also needs to continue to be given to structural reforms aimed at boosting productivity growth and economic flexibility.”

“Fundamental reforms to increase the efficiency of health care systems are also needed to cope with emerging demographic pressures,” the IMF concludes.

The IMF projected that world economic growth would slow to 4.3% this year from 5.1% last year, and that growth in the United States would slow to 3.6% from 4.4%.