Flaherty told to expect 2% growth
Private sector economists see Canada headed for modest GDP rise in 2012
OTTAWA— Fears of a financial meltdown in Europe or a double-dip recession in the United States are declining, but Canada is still facing only moderate expansion in the 2 per cent range in 2012, private sector economists told Finance Minister Jim Flaherty.
“Canada will continue to see modest growth going forward,” Flaherty said, after meeting the analysts in advance of the March 29 federal budget.
A year ago, private sector experts had been predicting nearly 3 per cent growth in Canada this year. But now their forecasts remain in the 2 per cent range because of the economic headwinds from Europe and the U.S.
After the closed-door meeting, the economists noted that European leaders have so far avoided a continent-wide financial disaster, and that U.S. job numbers provide hope for the recovery.
“Most of the economists feel that Europe remains a challenge but the United States is starting to look at bit positive,” Flaherty said at a press conference.
But the analysts expressed varying degrees of concern about risks to the Canadian economy from overheating in the Canadian housing market, particularly for condominium sales in Toronto and Vancouver, and the high level of household debt in Canada.
“External risks may have subsided a little bit since the fall but at the same time I would argue that some of the domestic risks are as high or perhaps even a little bit higher,” said TD Bank’s Derek Burleton.
The economists said the federal government’s plan to eliminate the federal deficit — $33 billion in fiscal 2010-11 — appears on track. In fact, there was agreement that Ottawa’s budgetary position is improving to the point that the deficit in the 201112 fiscal year may be considerably below the forecast $31 billion. The Harper government had been expected to spell out its austerity plan in the budget. But Flaherty said the details of cuts to jobs and services will be left to individual departments to explain later. He also said Ontario shouldn’t use corporations as scapegoats to try to balance the province’s books by scrapping tax breaks for businesses that buy tickets for NHL hockey and other professional sports. Ontario Finance Minister Dwight Duncan has said the province, which faces a $16 billion deficit, would like to scrap the tax write-off for corporations that buy tickets for professional sports and cultural events. It would save Ontario $15 million annually.
Flaherty said he was disappointed with Duncan’s approach, saying “we have much bigger issues than that.” He said the provinces as a group need to work to wind down their annual budget deficits for the sake of their economic health.
“I’m just not into scapegoats, I’m not into side issues,” he told reporters.