No recession ahead, says Morneau
TORONTO Canada is not currently in a recession, nor is it heading for one, Finance Minister Bill Morneau said on Wednesday, disputing a notion that some economists have begun to contemplate in recent weeks.
“They would be incorrect,” Morneau said following a morning speech in Toronto, less than 24 hours after he released the 2019 federal budget. “That would be technically wrong and certainly not in line with our expectations.”
A downturn in the economy could have significant bearing on the government’s fiscal plans. The Liberal budget is based on expectations that GDP will grow by 1.8 per cent in 2019, and projects a deficit of $20 billion this year. By 2024, that deficit is expected to have fallen to $10 billion.
But economic growth in Canada was almost non-existent in the fourth quarter of 2019, due to a collapse of oil prices and a continued decline in housing and business investment.
Morneau said that the government had already projected two quarters of weak growth — the fourth quarter of 2018 and the first quarter of 2019 — but that it expects the economy will pick up steam after that.
“We’re expecting … that we will have a return to growth at expected levels in the second quarter (of 2019) and our longterm forecasts are positive,” Morneau said.
This week, Fidelity Investments portfolio manager David Wolf, a former adviser at the Bank of Canada, suggested that Canada may already be in a recession even if there haven’t been two consecutive quarters of economic decline. GDP shrank by 0.1 per cent in November and December, but Canada eked out 0.4 per cent growth in the fourth quarter.
Gluskin Sheff chief economist David Rosenberg has also said that recession is “unavoidable” this year and that if Canada isn’t already in one, it is one rung away on the ladder.
If Canada does enter recession, Morneau wouldn’t commit to further deficit spending.