Canada's growth is likely to decelerate further in 2008 and 2009 because of the sharp downturn in the US economy, the IMF reported. Representatives from the IMF downwardly revised 2008 growth rate projections to 1.8 pct from 2.0 pct and 2009 projections to 2.4 pct from 2.7 pct in its Article IV Consultation with Canada. "The revision primarily reflects the downgrading of the staff's US forecast, which exacerbates the drag from net exports, as well as the recent tightening of Canadian financial conditions," a staff statement said. The staff observed the trade and financial linkages between the US and Canada are among the strongest in industrialized nations, and saw this as a reasonable assumption of US spillovers into Canada. The staff commended the Bank of Canada's interest rate cuts and said more may be needed if the economic situation in the US worsens. The Bank of Canada lowered its target for overnight interest rates to 4 pct in two quarter-point cuts in December and January On fiscal policy, staff said the tax cuts announced in October would also benefit the economy. The staff noted financial conditions have only been modestly affected by the spillovers from the global liquidity crunch. "While the banking system has been remarkably robust to global financial strains in our view, parts of this has to do with a lack of competition in the banking sector," said Tamim Bayoumi, chief of the IMF's mission to Canada. Bayoumi added an increase in competition "could help provide money to marginal borrowers such as small- to medium-sized enterprises that provide innovation and new jobs". The staff has also recommended lowering restrictions on foreign direct investment and decreasing high marginal effective tax rates on investment and saving.