(Updates with Flaherty comments from third paragraph.)
Oct. 25 (Bloomberg) -- Canadian Finance Minister Jim Flaherty said he will proceed with plans to balance the budget even as slower-than-projected growth curbs revenue, adding he won’t be “inflexible” if the global economy deteriorates.
Flaherty, speaking to reporters in Ottawa, said private economists forecast 2011 economic growth of 2.2 percent, compared with their March forecast of 2.9 percent. Flaherty surveys economists for predictions on indicators such as growth and interest rates for his fiscal planning.
The government is still aiming to balance the budget “in the medium term,” Flaherty said today, without being more specific. He said he’ll provide more details in a fiscal update “in the next few weeks,” adding “we have some work to do.”
Canada’s governing Conservatives released a fiscal plan in June that pledged to balance the budget by the year beginning April 2014, using spending cuts of up to C$4 billion ($3.9 billion) annually and closing tax loopholes. Canada projects a deficit of C$32.3 billion this year.
Flaherty, who declined to answer specific questions on whether the government still planned a balanced budget by 2014, said European leaders risk triggering another global recession if they fail to resolve their debt crisis. Private sector economists aren’t predicting a recession in Canada, he said.
“The government is not going to be inflexible,” Flaherty said after meeting economists from banks, universities and research institutes in Ottawa. “If we had to do more in Canada to protect jobs for example, we would of course be flexible about that.”
Flaherty’s office released estimates showing economists project Canada’s economy will generate C$1.71 trillion in output this year, which is C$2 billion more than the government projected in its June budget. Output will be C$85 billion less between 2012 and 2015 than forecast by the government in June, according to the estimates.
That may reduce revenue by about C$12 billion over that period, according to a calculation based on government figures from its June budget that showed the government anticipates revenue to be between 14.3 percent and 15.1 percent of nominal output through 2015.
The Bank of Canada today also lowered its growth projections for the country’s economy, reducing its forecast for Canadian growth this year to 2.1 percent from a 2.8 percent estimate in July, and cut its 2012 outlook to 1.9 percent, down from a 2.6 percent forecast.
Flaherty said the economists downgraded their forecasts by a similar amount, 0.7 percentage points. The economists forecast growth next year at 2.1 percent, down from a March projection of 2.8 percent.
The finance department said Oct. 12 the country’s budget deficit was a smaller-than-forecast C$33.4 billion in the year ended March, C$2.8 billion less than predicted in the June budget because revenue was higher than expected and spending lower.
While the government surveys private sector economists to generate its growth forecasts, Flaherty’s has used more conservative projections for growth for planning purposes, citing uncertainties in the global outlook. In his June budget, he used estimates of output that were C$10 billion less than those made by the economists.
--Editors: Paul Badertscher, Vince Golle
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