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Canada Will Not Escape Economic Malaise Of The US: TD Economics


  • U.S. economy slated for a recession in 2008

  • Real GDP growth expected to be a dismal 1.1 percent in both years, 2008 and 2009

  • Canada will produce equally soft headline GDP growth of just 1.1 percent in 2008 but rebound modestly to 1.8 percent in 2009

  • Provinces - particularly Ontario - with a heavier manufacturing base and, in particular, low net exports of high-demand resource products, will be hit hardest.

TORONTO, March 19 /CNW/ - Canada will not escape the economic malaise that is underway in the United States according to the March issue of the TD Quarterly Economic Forecast. And, the American contraction will widen regional divides in Canada. According to Chief Economist, Don Drummond: "The west will remain in the best shape to weather the economic headwinds, while central Canada - and notably Ontario - will be in the worst."

Going south

Until recently, economic indicators suggested the United States could potentially skirt a recession. This view is now in question given the broad-based nature of jobs losses in each of the first two months of 2008. The house is not a home

The last two months have also revealed more bad news about the housing downturn. Existing home prices have fallen for an unprecedented 18 months and high inventories suggest a reprieve is not in sight. Never before have Americans owned less of their homes, as equity dipped below 50% in 2007 for the first time since the Federal Reserve started tracking the data in 1945.

Necessary evil

The 2009 outlook is more promising. "The adjustment underway in the U.S. is a necessary evil that will allow lenders and homeowners to work through oversupply, stagnating home prices, and the excesses of past lax lending standards" commented Drummond. A narrow escape

U.S. troubles will continue to wash onto Canadian shores, contributing to modest 1.1 percent economic growth in 2008. Two direct linkages between the countries will continue to harm the domestic economy. First, the current tightness in the credit cycle will act as a speed bump to investment by raising the cost of funding and restricting investment for a number of Canadian companies. Second, the lethal combination of a high Canadian dollar and weak U.S. demand will continue to drag export growth. In fact, exports are expected to contract outright in the first half of the year extending the massive loss in shipments that ended 2007 in dramatic fashion.

At last, good news

"Cooling domestic demand growth in Canada won't change the fact that the underpinnings are day and night relative to its US counterpart" remarked Drummond. Among the differences, Canadian housing markets are flourishing, while consumers are already benefiting from past fiscal stimulus and strong income growth. These factors won't come apart at the seams in 2008, especially when an additional 150 basis points in monetary stimulus of central bank cuts is added into the equation. As such, Canada remains fundamentally sounder than the U.S.


Recession Call Interview - Link

(CNN) - ECRI's managing director, Lakshman Achuthan, on CNN’s Your $$$$$ with Ali Velshi and Christine Romans discussing ECRI’s first recession call since early 2001, why it didn’t have to be this way, and how the recession affects people differently.


IMF Chief Says Global Outlook Dims, To Cut Forecasts
Mon Mar 17, 2008

PARIS, March 17 (Reuters) - The global economic outlook is worsening and the risk of contagion from a financial markets crisis that began in the United States is now very high, IMF chief Dominique Strauss-Kahn said on Monday.

At a news conference in Paris, he welcomed the overnight steps taken by the U.S. central bank and said the International Monetary Fund would be cutting its growth forecasts again soon.

The yuan and yen looked weak, the euro overvalued, and the dollar somewhere in-between, said Strauss-Kahn, holding a news conference he held jointly with OECD chief Angel Gurria.

"The dollar is indeed starting to weaken, it's true, but the weakest currency is not the dollar," he said.

"The weakest currencies are Chinese renminbi and Japanese yen in part," he said.

"The whole monetary system is starting to become stretched now, with, on the strong side, the euro, and clearly on the weak side the Chinese and Japanese currencies, and between the two the dollar," he said.

The current climate was not a problem for depositors.

"It's a problem for economic growth. We clearly face a situation in which the risks to economic growth are clearly more and more serious." The IMF would be lowering its economic growth forecasts in the coming weeks, including its forecast for the United States, Europe and China, he said.


Canada may face snap poll on immigration changes
March 24th, 2008 - 10:48 am ICT by admin -

Toronto, March 24 (IANS) A proposed amendment to Canada’s immigration policies has triggered the possibility of fresh elections in the country. Though China is the top source of immigration to Canada, India is likely to overtake it this year. The amendment, which will give the government sweeping powers to regulate immigration, is included in the budget implementation bill. Parliament will vote on it early next month.

While all three opposition parties accuse the immigration minister of trying to assume draconian powers through the amendment, the minister says “nothing could be further from the truth”.

On the contrary, the minister - Diane Finley - says the amendment bill allow her government to clear the backlog of about 900,000 applications for immigration. She told Canadian TV Sunday the amendment was aimed at cleaning up the immigration mess left by the previous Liberal party government.

Finley said her Conservative party was ready to face a fresh election if the combined opposition defeats the amendment. “We have to make it easier to get more people here faster. We have a backlog right now that the previous government ballooned from 50,000 to 800,000. It has since grown to 900,000,” she said.

Since the proposed amendment gives her powers to block anyone’s entry and decide how many immigrants from a particular country are allowed in each year, the minister tried to allay fears by saying that new measures will, in fact, speed up immigration of family members.
Currently, Canada gets about 250,000 immigrants each year, with family members accounting for about 30 percent.

If the amendment is passed, new immigration measures will come into force from February-end. The pro-immigrant Liberal party has not yet decided how it will vote on the amendment.
“We have not yet decided how we are going to vote,” Liberal MP Ujjal Dosanjh told IANS. But the New Democratic Party (NDP) has already introduced an amendment that seeks to remove proposed changes in immigration policies.

The issue is likely to heat up before parliament reopens March 31. Major immigrant communities such as Indo-Canadians and Chinese Canadians, who traditionally support the Liberal party, will voice their concern about the new policy. In fact, the Chinese Canadian National Council has already put pressure on the Liberal party to defeat the amendment even if it means fresh elections.

Council executive director Victor Wong said the million-strong Chinese community “would be very disappointed in the Liberals” if they didn’t defeat the amendment. Indo-Canadian bodies have not yet reacted to the proposed amendment.


South African firm to invest in Kenya Railways ( aka 'Lunatic Express') 
Written By:Claire wanja/AFP

Edited Excerpt
A South African-led consortium will invest 29 million dollars (20.4 million euros) in the 106-year-old Kenya-Uganda Railway by June 2008 to revitalize operations on the decrepit track.

The Kenyan and Ugandan governments handed over the money-losing colonial-era railway to Rift Valley Railways Consortium (RVRC) under a 25-year concession last year, and the company will pay an initial five-million-dollar fee to Nairobi and Kampala plus 11.1 percent of gross revenue.

RVRC said in a statement that it had invested 11.5 million dollars since it took control of the facility in November and planned to inject an additional 17.5 million dollars by June 2008.

The cash surpasses five million dollars that the RVRC must invest annually over the next five years in infrastructure upgrades under the leasing agreement between the firm and the governments.

The consortium expects to reap benefits from the recently expanded East African Community -- Kenya, Uganda, Tanzania, Rwanda and Burundi -- and the creation of a customs union, which opened up markets for 90 million people.

Conceived under the British mandate, the Kenya-Uganda railway began service on December 20, 1901 after more than a decade of planning and construction which was halted more than once by lion attacks on workers.

The line was widely known as the "Lunatic Express" or the "Iron Snake."

Derided by lawmakers in London for its enormous cost, the line runs some 900 kilometers (580 miles) from Kenya's Indian Ocean port of Mombasa, through Nairobi, and up the Rift Valley to Kisumu on the shores of Lake Victoria. From there, rail-steamer services go to Uganda, where a separate line runs.

Due to mounting financial woes, the East African Railways Corporation, as it was then known -- owned by Kenya, Uganda and Tanzania -- halted regional operations after the East African Community collapsed in 1977.

Its largest section was taken over by the government-owned Kenya Railways Corporation, but poor management, lack of maintenance and insufficient funds for the purchase of new engines forced it to cut back services.

See the Goan connection – Remembering the Railway Goan Institute –Nairobi -

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