Flaherty to battle declining growth
Economy stumbling as budget nears
OTTAWA — Jim Flaherty’s job to cut the federal deficit just got a whole lot harder.
With the latest economic numbers showing Canada facing a tough climb to reach any meaningful growth this year, after slipping to recession-level output in the last half of 2012, Ottawa knows it has its hands full to balance the budget.
Canada’s finance minister said Friday his upcoming budget — expected “before too long” — may close more tax loopholes and possibly further reduce program spending.
“We start from the premise that we’re going balance the budget by 2015. And it may need some more sacrifice in budgeting among various ministries of the government,” he told reporters in Ottawa.
“What we do is we not only look at the revenue side but we look at tax loopholes, for example. We’ve been closing tax loopholes in every one of the budgets that I have done since 2006. And we continue to do that,” he said.
“We will also look at program spending. And we can do some more tightening there, if necessary.”
Flaherty was speaking after Statistics Canada reported the economy slipped into reverse last month but still managed to eke out a gain for the final quarter of 2012 and end the year with total growth of 1.8 per cent — down from 2.6 per cent a year earlier.
Now, 2013 is shaping up as another under-performing year, with the central bank calling for two per cent growth, but private sector analysts expecting a much weaker performance as the global economy faces continued threats from Europe and fiscal uncertainty in the United States.
Statistics Canada said gross domestic product edged up 0.2 per cent in the fourth quarter of 2012, the same pace as the July-toSeptember period. On an annualized basis, the economy grew by 0.6 per cent in the fourth quarter, compared with 0.1 per cent in the United States.
Canada’s fourth-quarter annualized growth was the weakest since a 0.8 per-cent decline in the second quarter of 2011, which was heavily impacted by the tsunami in Japan.
Meanwhile, third-quarter annualized growth was 0.7 per cent, which was down from 1.9 per cent in the second quarter and 1.2 per cent in the first three months of 2012.
Together, those two quarters reflected the poorest economic performance for Canada since the 2008-09 recession.
“I’m not surprised by the numbers. We do look ahead,” Flaherty said.
The report does “reflect the uncertainty that we see abroad and weakness in the global recovery,” he said.
“What we can do in our country, of course, is control our own spending, which is what we’re doing. We’re working hard on the budget. We will not reduce transfers to individuals or to provinces for health-care, education and social services.”
Flaherty will meet next Friday in Ottawa with private sector economists to get their latest growth outlooks ahead of the federal budget. He did not set a date for the budget, although it is widely expected to come sometime in the last two weeks of March.
“I expect ... that their (economists’) projections will be lower than they were the last time we met in the autumn,” he said. “I will have to account for that in our budget projections, including the revenue projections, which I will do.”
Statistics Canada said Friday that household and government consumption increased, as did business fixed capital investment.