Wed Mar 11, 4:25 PM
Julian Beltrame, The Canadian Press Email Story IM Story Printable View
By Julian Beltrame, The Canadian Press
OTTAWA - The federal government presented a rosy picture of Canada’s faltering economy Wednesday despite two separate reports that suggest the downturn is more severe than thought and will likely get worse before it gets better.
Prime Minister Stephen Harper and Finance Minister Jim Flaherty trumpeted an ambiguous International Monetary Fund report that says Canada “is better placed than many countries to weather the financial turbulence and worldwide recession.”
In the House of Commons, Harper chided the opposition for being purveyors of doom and gloom.
“I would encourage the party opposite rather than always trying to find the negative in everything, simply get on passing (the budget) and doing something positive for Canadians,” he said.
Earlier, Flaherty said the IMF report supported the government’s $40-billion stimulus spending proposals over two years.
The international agency cited the country’s strong fiscal position, government responses and a sound banking sector for keeping the depth of the downturn more muted than many other countries.
But it also made clear that Canada’s economy is in for a shock in the next few months, and added that it’s projections are more likely to err on the down side than up side.
“Looking ahead, output is likely to contract significantly in the near term, recovering as the full effects of policy stimulus are felt,” the IMF stated.
And it cautioned: “Downside risks predominate, including negative spillovers if the global environment worsens more than expected.”
As well, a new report from parliamentary budget officer Kevin Page suggested that Canada’s economy may be weaker than previously reported and not much better than that of the United States.
But Flaherty saw the glass as half full, pointing out the IMF’s praise of Canada’s fundamentals and strong banking system.
“We have the strongest fiscal fundamentals in the G7, we have paid down debt, we’re not creating a long-term permanent deficit… (and) that leads us late into the recession and early out of the recession,” he said.
A key to recovery will be quickly implementing the government’s stimulus package, he said, and again took a shot at the Liberal-dominated Senate, who he accused of delaying passage of the budget implementation bill.
The government unveiled a new website Wednesday - actionplan.gc.ca - allowing Canadians to keep track of how stimulus money is being spent.
The Senate finance committee began hearings on the budget Tuesday, but has given no signal it is prepared to delay passage past April 1, the beginning of the new fiscal year and the earliest the stimulus money can be rolled out.
Flaherty’s rosy assessment comes a day after Harper’s first major speech on the economy Tuesday in which he said Canada would bounce back faster and stronger than other countries.
The view appears to derive from an analysis first outlined by Bank of Canada governor Mark Carney in January, when he projected the economy would bounce back strongly in 2010 to 3.8 per cent growth.
Nothing in the IMF or the parliamentary budget officer’s reports Wednesday contradicts that optimistic view, but they do not support it either.
The IMF predicted Canada’s economic activity will likely decline further in the upcoming months before picking in response to government stimulus, but does not say it will recover ahead or stronger than other nations.
As well, Page undercuts the suggestion that Canada’s economy is much stronger than that of the U.S.
He argued that although last quarter’s 3.4 per cent gross domestic product contraction flatters Canada - compared to the 6.2 per cent jolt suffered by the U.S. - the two figures don’t begin to reflect the relative performances.
Page said a better indicator is gross domestic income, which measures Canadians’ purchasing power, and that shows a plunge of 15.3 per cent in the fourth quarter over the previous three months, 10 times the U.S. contraction.
The sharp drop was primarily driven by tumbling in corporate profits as a result of the crash in world commodity prices, the report states.
Flaherty acknowledged that commodity prices are negatively affecting Canada, but said that does not change the fact that Canada has better fundamentals than its industrialized competitors.
In another study Wednesday, DBRS said government stimulus packages are “unlikely to have a perceptible impact this year” to boost the economy.
The debt rating agency also said Wednesday that the current period is shaping up as “less than a depression, but greater than a recession.”
DBRS “expects that credit will remain tight in 2009, unemployment will continue to rise, GDP will contract, corporate defaults will rise, the value of commercial and residential real estate will continue to fall and pension shortfalls will make headlines.”