Flaherty says economy may be in recession

Sun Nov 23, 2008 6:02pm EST
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TORONTO (Reuters) - Finance Minister Jim Flaherty said on Sunday that the global financial crisis may have pushed Canada's economy into recession, the first time the Conservative government has conceded that possibility.

"We may well be in a technical recession in the last quarter of this year and the first quarter of next year," Flaherty said in an interview with CTV television.

"It's quite possible that Canada will be below the line slightly in both of those quarters, which technically would be a recession," he said.

Flaherty's remarks followed a speech by Bank of Canada Gov. Mark Carney last week in which he said the risk of recession was growing. Economists define recession as two consecutive quarters of contraction.

The central bank is likely to cut interest rates again to keep Canada's export-reliant economy afloat in the face of a global recession and flagging consumer demand in the United States, Canada's main trading partner, Carney said.

Flaherty is due to present updated fiscal and economic projections on Thursday.

In the CTV interview, the minister said the budget would stay balanced in the current fiscal year ending in March but a deficit was not out of the question beyond that.

"We're planning, and I'm certainly trying, to make sure that we can plan toward an operational surplus next year and the year after that. The challenge will be, of course, that we have to stimulate the economy further."

Flaherty also repeated any fresh economic stimulus would not come in his budget update on Thursday, saying he would consider such a package for next year's budget plan.   Continued...

<p>Jim Flaherty, Canadian Minister of Finance, speaks to the media after the federal and provincial finance ministers meeting in Toronto in this November 3, 2008 file photo. REUTERS/Mark Blinch</p>