February 1, 2011 / 7:38 PM / in 7 years

Canada cuts 2011 growth forecast to 2.4 percent

OTTAWA (Reuters) - The Canadian government trimmed its estimate of 2011 economic growth on Tuesday and the finance minister said he expects to encounter “resistance” to efforts to bring the unemployment rate down.

Ottawa lowered its growth estimate to 2.4 percent from 2.5 percent, based on the median of private sector forecasters. It sees the economy growing at 2.8 percent in 2012, unchanged from its previous estimate.

The government surveyed private sector economists in December and their forecasts will be used for budget planning purposes.

Finance Minister Jim Flaherty repeated his concerns that the economic recovery remains fragile and said that it could be difficult to lower the unemployment rate.

In December, the jobless rate was 7.6 percent, Statistics Canada reported, and it is forecast to be at the same level in January. Statscan issues its January employment report on Friday.

“We anticipate resistance to the unemployment rate coming down,” Flaherty told reporters.

“This is true also in the United States. A lot of employers have been hesitant to rehire because of their perception of risk in the economy. We expect that they’ll be more confident going forward.”

The government forecast nominal GDP growth of 4.7 percent in 2011 and 5.2 percent in 2012.

Last year, the Finance Department revised down private-sector forecasts for nominal GDP growth in what it called an “adjustment for risk” to account for the highly uncertain global outlook.

Flaherty said on Tuesday the government had not yet decided whether it would include a similar “risk adjustment” in this year’s budget, which will be presented in March, as economists were slightly more upbeat in their outlooks.

Stefane Marion, chief economist at National Bank Financial, said the conservative outlook reflected the potential impact of global difficulties down the line.

“One of the characteristics of this forecast compared to last fall is, by and large, we all feel a bit more upbeat for the next 12 to 18 months,” said Marion.

“However, the long-term forecast does reflect some uncertainty and some of the risk factors related to what’s happening in the global economy.”

Reporting by Louise Egan and Leah Schnurr; editing by Rob Wilson

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