CALGARY, Alberta (Reuters) - Canada’s economy remains robust despite economic turmoil in the United States, Finance Minister Jim Flaherty said on Wednesday, with government finances in the black and growth expected this year and next.
In a speech to a Calgary, Alberta, business audience, Flaherty said Canadian economic fundamentals remain solid, even though the U.S. housing and credit markets are in turmoil.
“Canada’s economic future is bright and I say that based on the economic fundamentals of this country, which are solid,” Flaherty said in his speech.
While the Bank of Canada warned on Tuesday that Canadian inflation could spike to 4 percent and has cut its forecast for Canadian economic growth to just 1 percent from 1.4 percent, Flaherty remains optimistic, predicting budgetary surpluses and more growth.
Most economists expect positive economic growth in Canada this year and in 2009, the minister said.
“Different experts have different views about the likely growth but it’s all on the plus side in terms of positive economic growth for Canada this year and next,” the minister told reporters. “We’re satisfied that we’re on track in terms of our budgeting for Canada, that we will continue to run a surplus in Canada and of course, a balanced budget.”
The minister also repeated promises to continue cutting taxes while reducing the government’s debt.
Flaherty also told reporters in Calgary there was no U.S.-style housing “bubble” in Canada and lauded recent steps by the government to tighten amortizations on government backed mortgages and raise downpayments.
“They are modest changes but we do want to encourage Canadians to build up equity in their homes,” he said, adding that the government wanted to avoid “anything” like the U.S. housing-sector crisis.
“Our concern has been a tendency for longer amortization period of 40 years and purchasers putting very little money down.”
The changes, due to take effect in October, include ending government-backed mortgages with 40-year amortization periods, and a new requirement that buyers have a minimum down payment of 5 percent.
Flaherty declined to comment on inflation, other than to note that the Bank of Canada had emphasized on Tuesday that the risks to its inflation outlook were balanced. The bank sees inflation tipping above 4 percent by early next year.
Reporting by Scott Haggett, Louise Egan and Lynne Olver; Editing by Frank McGurty