Canada says well placed to weather economic storm

Thu Jun 11, 2009 4:57pm EDT
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By Louise Egan and Cameron French

MONTREAL/CAMBRIDGE, Ontario (Reuters) - Canada forecast a wide but manageable budget deficit on Thursday and offered help for the struggling economy in terms of rock-bottom interest rates and billions of dollars in government aid.

At separate events, the government and the central bank both admitted to concerns about Canada's export-oriented economy, which may decline by almost 5 percent this year, and where a surging currency may offset the positive impact of higher commodity prices and better financial conditions.

But even as Bank of Canada Governor Mark Carney told markets not to overplay the "green shoots" of economic recovery that are starting to emerge, both he and Prime Minister Stephen Harper insisted that Canada remains in a healthy position compared to other industrialized nations.

"Our starting point is stronger than basically any other industrialized country," Carney told a news conference in Montreal.

Canada went into the world economic recession with the only budget surplus in the Group of Seven big industrialized countries, along with a still growing economy and healthy, well-capitalized banks.

That surplus melted away last year, as tax revenues fell and the government began priming the economic pump with billions of dollars of financial aid.

The Bank of Canada slashed its benchmark interest rate to a record low 0.25 percent to help spur growth and, in an unprecedented move, promised to keep the rate at that level until mid 2010, unless inflation spirals higher unexpectedly.


<p>Prime Minister Stephen Harper outlines his government's progress on their economic action plan during a town hall meeting at the Armenian Community Centre in Cambridge, Ontario, June 11, 2009. REUTERS/Geoff Robins</p>