TORONTO (Reuters) - A slowing U.S. economy, lofty Canadian dollar and record high oil prices will be a drag on Canada’s manufacturing heartland of Ontario this year, the province’s Minister of Finance Dwight Duncan said on Monday.
The Ontario economy relies heavily on exporting automobiles and auto parts to the United States, which means its economic performance is strongly influenced by the factors Duncan outlined in a Toronto speech.
“Ontario is being buffeted by a number of challenges which are conspiring to create a level of uncertainty that we have not seen in a very long time,” said Duncan.
Duncan expected 2008 to be a “challenging year” for Ontario’s economy as manufacturers struggle with a Canadian dollar that’s above parity with the U.S. dollar and oil prices which hit a fresh record high on Monday.
The speech came hours after a domestic report showed slumping exports had slowed Canada’s economic growth in the fourth quarter more than analysts had expected.
The report also showed manufacturing activity fell 3.2 percent in December, its lowest level since December 2001.
Duncan shied away from firing back at Canadian Finance Minister Jim Flaherty, who said recently that businesses looking to invest in Canada and concerned about taxes would consider Ontario the last place to go.
Flaherty had said that taxes for new business investment were too high under the Ontario Liberal government of Premier Dalton McGuinty, and would discourage foreign investment.
“I can’t speculate on what’s motivating Mr. Flaherty in this,” said Duncan. “But what I can say is the government of Dalton McGuinty will move in a positive way to address the challenges in our economy and will move to fill in what the federal government chose not to do.”
Duncan’s comments come a day after McGuinty sent a letter to Canadian Prime Minister Stephen Harper, describing Flaherty’s comments as “a betrayal of the federal government’s responsibility to champion the Canadian economy, both at home and abroad.”
The provincial Liberals criticized the federal budget Flaherty delivered last week as doing little to help the manufacturing-dependent economy of Ontario.
Flaherty said last month that the health of Ontario, Canada’s most populous province, was his biggest concern as U.S. economic growth slows, as Canada relies heavily on the U.S. to consume the bulk of its exports.
Reporting by Frank Pingue; Editing by Bernadette Baum