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.
The Conservative government is considering some form of a stimulus package to help the economy but has given few details, except to talk about putting money into infrastructure.
“The credit of the government of Canada is the best in the world, so we are in a position as a government to take various actions. We have lots of leeway to act and certainly we’re reviewing steps we could take in addition to infrastructure ... that would help stimulate the economy,” Flaherty said.
He added that the health of Canada’s auto manufacturers is a significant issue, but an aid package is not a done deal.
Canada’s car dealers recently asked the federal government for help, saying they need an easier way to secure financing. But Flaherty said he does not think the public would want to see aid given until a detailed survival plan for the auto sector is presented.
“If there is not that demonstrated bridge to sustainability ... then I think most Canadians would not want their tax dollars to be put forward in a way that would not be fruitful,” he said.
Additional reporting by David Ljunggren and Randall Palmer in Ottawa; editing by Rob Wilson