Canada may be heading for recession: Flaherty

Mon Nov 24, 2008 3:32pm EST
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By Frank Pingue

TORONTO (Reuters) - Canada's economic picture is not improving and the uncertain times that lie ahead make it reasonable that the economy could soon fall into recession, Finance Minister Jim Flaherty said on Monday.

Speaking to reporters after a speech in downtown Toronto, Flaherty also said the government was not in a rush to provide a rescue package to the automotive industry, noting that the United States has taken a pause in its deliberations.

The unfolding credit crisis and the slowdown in the global economy could catch up to Canada's economy and send it into a recession, which is usually defined as two straight quarters of economic contraction, Flaherty said.

"We may have a technical recession when the next quarter is put with this quarter. It may be that both quarters will be slightly negative for Canada," Flaherty said. "At that point we will have had a technical recession."

Canada's economy narrowly avoided a recession in the first half as data showed gross domestic product grew 0.3 percent in the second quarter after shrinking 0.8 percent in the first.

"Times are uncertain. The economic picture is not getting better," said Flaherty, who added that Canadians can count on the government to keep taxes low.

A number of the country's biggest banks have forecast in recent months that Canada will slip into recession.

Earlier, Flaherty said in his speech that the new reality includes wild swings in financial markets and economic forecasts that have grown more pessimistic by the day.   Continued...

<p>Finance Minister Jim Flaherty listens to a question during a news conference at Parliament Hill in Ottawa in this October 23, 2008 file photo. REUTERS/Chris Wattie</p>