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Canadian Economic Observer
April 2003

Economic events in March


The Bank of Canada increased the Bank Rate to 3.25% from 3% on March 4. Major banks followed suit, raising their prime rates to 4.75%.

Air Canada went into bankruptcy protection at month end. Various US carriers, including UAL Corp. and US Airways also filed for bankruptcy protection in the month.

Automakers announced more shutdowns. Ford scheduled week-long closures at two of its three assembly plants next month and in May, affecting over 5000 workers, while GM will have a one-week shutdown at a transmission plant affecting 2000 jobs.

Bombardier announced the layoff of 3000 workers or 10% of its aerospace workforce.

Aluminium producer Alcoa announced a $1 billion expansion of its smelter near Quebec City.

The Ontario government released its 2003-04 fiscal year balanced budget. Highlights include a reduction in the capital tax rate by 10% effective January 2004, a 100% corporate tax deduction to developers of new electricity, raising the floor for the surtax on incomes to $75,000 and increased health spending of $1.9 billion.

Newfoundland tabled its budget with no planned cuts to social programs or public service layoffs. Other highlights include tuition cuts, increased taxes on tobacco and alcohol, a decrease in the small business tax and new spending on health care equipment.

Quebec announced its budget with no new tax cuts and no tax increases. Health care spending will increase by $1.7 billion, along with new spending packages for housing, job training and the film and audiovisual industry.


The US, Britain and Australia began military action against Iraq on March 19. The US government announced a $75 billion (US) spending package to pay the initial cost of the war and to bolster Mideast allies affected by the conflict.

The European Central Bank cut its key interest rate a quarter of a percentage point to 2.5% at mid-month. Switzerland, Norway and Denmark followed suit.

The Japanese stock market hit a 20-year low, falling below 8000. Computer-related and auto stocks accounted for almost 40% of the decline. A new virus known as Sars (severe acute respiratory syndrome) began spreading rapidly from China, resulting in decreased tourism and consumer spending in the worst-affected Asian economies.

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