Canada's improved outlook good news for budget

Mon Mar 5, 2012 1:07pm EST
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OTTAWA (Reuters) - The Canadian economy may grow slightly faster this year than previously expected, private sector economists suggested on Monday, providing scope for the Conservative government to eliminate the budget deficit sooner than planned.

Finance Minister Jim Flaherty met with 13 economists to get their economic forecasts, which will feed into the March 29 federal budget. But the consensus numbers were not released because the economists needed more time to incorporate new "encouraging" data released by Statistics Canada on Friday, he said.

"The economists noted that the Canadian economy has been resilient over the last year and Canada will continue to see modest growth going forward," Flaherty told reporters following the meeting.

"We're going to follow up with the economists because the numbers last Friday were relatively encouraging ... so we agreed this morning we would follow up with them this week. We try to be as 'au courant' (up to date) as possible when we do the budget in terms of the prognostications."

The economy actually slowed in the fourth quarter to 1.8 percent annualized growth, as was widely expected. But Statscan unexpectedly revised third-quarter growth to 4.2 percent from 3.5 percent previously and December growth beat estimates at 0.4 percent.

Immediately after Friday's data was released, several economists said they would boost their projections for early 2012.

After meeting with Flaherty, Avery Shenfeld, chief economist at CIBC World Markets, told reporters the private-sector growth forecast for 2012 would not be substantially higher than the 2.1 percent provided last September, saying any change would be in the "decimal places."

Derek Burleton, deputy chief economist at Toronto-Dominion Bank, said he would likely raise his 2012 outlook to a range of 2.1 to 2.2 percent from 1.7 percent. Burleton sees the expanding economy boosting government revenues by roughly C$4 billion or C$5 billion a year, giving it plenty of wiggle room.

Economists cited the strengthening U.S. economy and a slightly reduced risk that the European debt crisis will spread as reasons for their brighter domestic outlook.   Continued...

Canada's Finance Minister Jim Flaherty speaks during a news conference in Ottawa March 5, 2012.       REUTERS/Chris Wattie