Economist believes Tories can balance books
But whether they will is another question, expert says
BMO chief economist Doug Porter tells the Star when we can expect the economy to grow again and answers the question: can the federal government really balance the budget. Q: What do you think of Friday’s report that May was the fifth month in a row of below-zero economic growth, which is indicative of a recession? A: It’s clearly a disappointment, not a complete shock but a disappoint- ment. It just extends the run of sour news on the Canadian economy that we’ve seen so far this year.
I guess what I found most striking and disappointing in the May number is that we can’t just point to the resource sector and say that’s the issue. There definitely was some broadening out (of declines) to many areas of manufacturing and even some of the service sectors.
It does all but lock in a second quarterly decline for the economy. Q: How long is it going to take for the economy to bounce back, or does anyone know? A: I don’t think anyone knows for sure. I do actually believe that June is going to be a positive number (for economic growth) just based on the early indications . . . for instance, there was a big rebound in auto production in June and that’s going to help.
We still believe that we’re going to get a little bit of growth in the second half of the year. But obviously everyone’s a bit more cautious on that prediction than we would have been even six weeks ago, just because of the steady stream of disappointing news we’ve seen in recent months. Q: What about the Canadian dollar? A: Our view is that the Canadian dollar will remain under pressure for the next three months or so. We do see it likely softening a little bit further . . . to around 75 cents (U.S.) or maybe a little bit lower. Q: Can the federal government balance its books this year or will it run a deficit? A: I believe they can still balance the books because they do have control on spending. The question now is: Should they try to balance the books? I’m not, and I never have been, convinced that it should be priority number one. I’m not sure that’s actually the appropriate goal to aim at given that the economy is struggling. I don’t quite see the point of making balancing the books the number one goal when growth has taken a big step back here. Q: Should the government be spending more, then, to stimulate the economy? A: Yes, but of course, as I always like to point out, stimulating the economy doesn’t necessarily mean spending more. It could mean reducing taxes.