Flaherty says economy has not recovered

Wed Nov 18, 2009 5:39pm EST
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OTTAWA (Reuters) - Canada's economy has not yet recovered from recession so the government will follow through on the second phase of stimulus spending next year, Finance Minister Jim Flaherty said on Wednesday.

Flaherty told reporters he would not introduce any big new spending items in the 2010 budget, however, as he seeks to balance the books in the medium term.

"Our economy has not recovered. I think it is recovering but we need to stay the course during the next year and continue to stimulate the Canadian economy," Flaherty said.

"That means no big, new spending programs next year."

Canada posted a budget deficit in the 2008-09 fiscal year after a decade of surpluses, as it ramped up spending to offset the economic downturn. It expects the deficits to last another five years.

Flaherty repeated on Wednesday that he hopes a return to economic growth will result in a balanced budget but, if necessary, he will curb spending.

"We have to, quite frankly, manage expectations," he said.

Flaherty announced on Wednesday that he will host his G7 counterparts in February in the Arctic town of Iqaluit, the territorial capital of Nunavut, and likened the gathering to an informal "fireside chat" rather than a formal meeting ending with a communique.

He said Canada and South Korea, which are co-chairing the G20 next year, are in discussions about which country would host a finance ministers meeting in June leading up to a G20 summit that month in Canada.

(Reporting by Louise Egan; editing by Rob Wilson)

<p>Canada's Finance Minister Jim Flaherty speaks during Question Period in the House of Commons on Parliament Hill in Ottawa October 26, 2009. REUTERS/Chris Wattie</p>