Canada says tough times a challenge for budget

Thu Jan 31, 2008 5:10pm EST
 
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By Louise Egan

OTTAWA (Reuters) - Canada is better placed than other members of the Group of Seven industrialized nations to withstand the difficulties likely to confront the global economy this year, Finance Minister Jim Flaherty said on Thursday.

Flaherty told reporters that this year's difficulties would constrain the budget he is expected to bring down in February or early March, but said "there is more to be done" to help manufacturers buy machinery and equipment to boost productivity.

In his last budget, Flaherty introduced special help for manufacturers, which are struggling to compete due to the strong Canadian dollar and softening U.S. demand. The so-called accelerated capital cost allowance allows manufacturers to write off their investments in machinery and equipment over two years instead of the normal seven years.

This measure was set to last for two years but industry groups have asked to have it extended.

"It's working," Flaherty said. "There's more that can be done, particularly with respect to acquisition of new machinery and equipment, because, once again, if we don't have a more productive manufacturing sector we will not have a vibrant manufacturing sector in Canada," he said.

He gave no other clues as to what his next budget will contain, saying most of the heavy lifting had already been done in a tax-cut announcement last October.

"We expect slower economic growth than we anticipated several months ago and the risks are on the downside, so we will be careful and fiscally prudent in our budgeting this year," he said. "We will maintain a surplus, of course, but it's a challenging year budget-wise."

Flaherty said his team would work over the weekend and all next week on the budget, but gave no date for it to be unveiled.   Continued...