Government says economy can avoid recession

Mon Oct 6, 2008 6:36pm EDT
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By Frank Pingue.

TORONTO (Reuters) - Canada's government said on Monday the economy can still avoid a recession even as the global financial crisis battered the Toronto stock market and economists warned of little growth until late next year.

Prime Minister Stephen Harper said Canada was not immune to the impact of a global economic slowdown, but it was not in a recession yet. Harper's aides said there were no plans for a special bailout for the country's banks.

"I remain fundamentally optimistic about the Canadian economy, but optimistic, as I've said from the beginning, within the framework we're now living in, and that is in a period of economic uncertainty," Harper told reporters.

He said he understood that investors were worried, but should not "press the panic button."

A Bank of Nova Scotia report on Monday forecast a Canadian recession that could last well into 2009. Other economists stopped short of predicting recession, usually defined as at least two consecutive quarters of contraction, but they said the country should expect little economic growth for much of the next year.

The Toronto Stock Exchange joined in Monday's global market retreat and posted its biggest intraday drop in two decades, falling more than 10 percent in early trading, before recouping about half its losses.

Shares on the country's main equity market closed down more than 5 percent, led by a sharp retreat in the energy sector as oil prices tumbled over concerns of a global recession.

Worries over falling commodity prices also pushed the Canadian dollar to its weakest day since May 2007 against the rallying U.S. dollar.   Continued...

<p>Prime Minister Stephen Harper (L) talks with Liberal Party Leader Stephane Dion during the English leaders' debate in Ottawa, October 2, 2008. REUTERS/Tom Hanson/Pool</p>