(Adds minister’s comments on balanced budget, commodity prices)
By Alastair Sharp
TORONTO, Dec 14 (Reuters) - Canada’s weakening currency will probably face further pressure from persistently low commodity prices that also complicate the country’s fiscal situation, the country’s finance minister said on Monday.
“Commodity prices are softening, affecting our terms of trade and making important inputs - so vital for our manufacturing sector - more expensive,” Bill Morneau said in his first public speech since being named to head the finance portfolio after the Liberal government’s election victory in October.
Morneau said he was encouraged by a recent uptick in the U.S. economy, but China and Europe were causes for concern.
“It is very likely that global economic conditions will remain unfavorable and that subdued commodity prices will persist,” he said. “This of course has important implications for the currency and our fiscal situation.”
Morneau elaborated on this while speaking to reporters after the speech, noting that projections for global economic growth are weaker than they have been in recent years, which impacts oil and other commodity prices.
“So, in an expectation that we won’t see a rapid change in global growth rates, we should expect that we will be facing a period where our resources are unlikely to be priced back where they were a number of years ago,” he said.
The U.S. benchmark for crude oil is near an 11-year low around $36 a barrel, while a government forecast from November assumes that that benchmark, West Texas Intermediate, will trade at an average price of $54 a barrel in 2016.
Morneau said the government is paying close attention to the oil price move given its impact on the domestic economy and currency, but that “we don’t look at just two weeks of oil prices when we come up with our budget numbers.”
The Liberals campaigned on a platform to run budget deficits of up to C$10 billion ($7.3 billion) a year in order to spend on infrastructure to boost growth after the economy fell into a modest recession in the first half of the year.
Morneau declined to say whether larger deficits would be necessary.
$1 = 1.3744 Canadian dollars Additional reporting by Leah Schnurr; Editing by Lisa Von Ahn and James Dalgleish