IMF cuts Canada 2008 growth forecast to 2.3 pct

WASHINGTON, Oct 17 (Reuters) - The International Monetary Fund cut its 2008 growth forecast for Canada on Wednesday because of pressure from neighboring United States and credit turmoil that handcuffed part of Canada's financial markets.

In its twice-yearly World Economic Outlook, the IMF said it now expects growth of 2.3 percent in Canada next year, down from its July forecast for a 2.8 percent increase.

"The short-term outlook is clouded by weaker prospects in the United States and the recent global financial market turmoil, which has affected parts of the Canadian markets," the IMF said.

The IMF on Wednesday slashed its 2008 growth forecast for the United States to 1.9 percent from 2.8 percent on concerns about the downtrodden housing market, steep energy costs and a slackening job market.

Part of Canada's asset-backed commercial paper market seized up in August after investors lost confidence in these debt instruments because of concerns about exposure to the risky U.S. subprime mortgage market.

Despite exposure to the troubled U.S. market, the IMF said Canada's fiscal position "remains strong, with the budget in surplus and the public debt ration on a firm downward path."