April 3, 2009 / 1:54 PM / in 9 years

Flaherty downplays severity of recession

LONDON (Reuters) - Canadian Finance Minister Jim Flaherty played down concerns about the depth of the country’s recession Friday, saying Canadians have survived worse hardships in the past and are not worried about the exact pace of the slowdown.

<p>Canadian Finance Minister Jim Flaherty speaks at a news conference following the G20 Finance Ministers meeting at a hotel, near Horsham, in southern England March 14,2009. REUTERS/Kevin Coombs (</p>

Flaherty predicted at the time of his budget in January that the economy would shrink by 0.8 percent this year -- an estimate now viewed as too optimistic by forecasters such as the OECD, which predicted a 3.0 percent decline earlier this week.

But Flaherty, speaking to reporters after a trade promotion event in London, said he did not see any urgent need to revise the government’s official estimate, which he said had been based on private-sector forecasts.

“I think we’re certainly looking at negative growth. I don’t think Canadians are that concerned if it’s ‘2-point-this’ or ‘1-point-that’,” he said.

“What they are concerned about is the government taking the necessary steps to ease the impact on those who will lose their jobs,” he added.

In his speech to the UK-Canada Chamber of Commerce, Flaherty stressed that Canada is well-placed to recover swiftly, but that it faces a difficult year and that it is too soon to say if the worst has past.

Canadians have overcome grueling episodes in the past, he said, citing the recession in the early 1990s and early immigrants who faced disease and death on boats crossing the Atlantic and arrived in the country penniless.

“Relatively speaking this is a mild economic recession. These are relatively mild challenges for us. We will come out of this strongly. We are able to withstand this,” he said.

Flaherty took part in Thursday’s G20 summit in London, and said the $1.1 trillion deal reached to boost the world economy exceeded his expectations.

More needs to be done outside the United States to restore banks to health, he added.

“I am encouraged by the actions of the Obama administration. There is now some meat on the bones of their plan,” he said. “I am still concerned banks in other countries need to be cleansed.”

Flaherty was sanguine about the possible inflation implications if the Bank of Canada decides to follow the United States and Britain in embarking on a policy of asset purchases to reflate the economy.

“The sense among finance ministers in the past 18 months is that we need to do what we need to do now, and worry about inflation later,” he said. “In Canada we are conscious of that.”

Additional reporting by Nicholas Vinocur and Louise Egan; editing by Peter Galloway

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