October 24, 2008 / 6:38 PM / in 9 years

Finance minister says Canada headed for rough times

NIAGARA FALLS, Ontario (Reuters) - Canadians are headed for tough economic times but the country is better able to withstand them than most others in the West, Finance Minister Jim Flaherty said on Friday.

“We’re in for rough times. These are difficult times. Canadians should not underestimate what we’re facing. We’re not an island. We’re a trading nation,” the newly reelected Conservative minister told a news conference.

“The point is Canada’s better positioned to endure the difficult times than other western industrialized countries.”

He insisted that the government would be able to maintain a modest budget surplus for the fiscal year that ends next March 31. Ottawa ran a C$1.75 billion ($1.38 billion) deficit in August but still had a C$1.16 billion surplus for the April to August period.

Yet Flaherty appeared to leave the door open to possible deficits to stimulate the economy in the future, saying Canada had been paying down debt and reducing taxes.

“We have more tools available for us in terms of addressing the need for further economic measures if that’s what’s required,” he said.

“You contrast that with some other countries that are running large deficits, and that in order to take further steps they have to add further burdens on taxpayers ultimately by increasing deficits.”

Flaherty has promised to present the annual autumn fiscal and economic update by the end of November, in which he will make clearer his view for the 2009-10 fiscal year.

“We’re going to continue to monitor the scenario and make an accurate assessment of where we are. We’re only in October and the uncertainty in the global markets continues. It continues today,” he said.

“It would be irresponsible of me to prejudge where we are going to be as we go over the next few months given that global uncertainty.”

Although Flaherty has not ruled out deficit spending, something that has not been done by a Canadian government since 1996-97, he said Canadians prefer a steady hand instead of grand new spending schemes.

“This has been, and this is, a difficult time for Canadian families, for Canadian businesses. People are worried about their jobs and their savings,” he said in a speech before his news conference.

However, he reiterated that Canada’s banks are sound and well capitalized, unemployment is near a generational low and Canadians are able to afford their mortgages, unlike many in the United States.

The country’s manufacturing sector could also benefit from the recent hammering of the Canadian dollar, which makes Canadian exports cheaper, while making Canadians think twice about buying or traveling outside the country.

The Canadian dollar has retreated from par with the U.S. dollar in July to C$1.2715, or 78.65 U.S. cents, to the U.S. dollar on Friday afternoon.

The Toronto Stock Exchange’s main index dropped nearly 7 percent at the open on Friday in line with a wave of sharp drops on equity markets worldwide, but later retraced some of those losses and was down about 2 percent late in the afternoon.

Writing by Randall Palmer; Editing by Peter Galloway

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