Canadian Finance Minister Jim Flaherty said economic growth was “very modest” at the end of last year, so he may need to pare spending more in his next fiscal plan to meet his goal of eliminating the country’s deficit.
Flaherty said today’s report showing a slowdown in the economy will be reflected in lower forecasts he’ll probably receive from economists he meets next week. The impact of weaker growth will be reflected in reduced revenue forecasts in his fiscal plan, he said.
“I expect that their projections will be lower than the last time we met in the autumn, which means that I will have to account for that in our budget projections,” Flaherty said. “We will stay on track for a balanced budget in the medium term, which is the current parliamentary term, which means 2015.”
Slowing growth and weak commodity prices have made it more difficult to balance the budget, a person with direct knowledge of the government’s budget planning told Bloomberg in January. Flaherty said in November that weaker growth and lower commodity prices would reduce government revenue by C$36 billion ($35 billion) over five years.
Flaherty spoke to reporters in Ottawa hours after Statistics Canada reported output growth slowed to a 0.6 percent annualized pace in the last three months of 2012.
The weakness won’t keep the country from meeting its goal of returning to budget balance, Flaherty said. While repeating a pledge not to cut transfers to individuals or provinces for social programs, Flaherty said he will “look at program spending, and we can do some more tightening there if necessary.”
“We start from the premise that we’d like to balance the budget in 2015, and it may need some more sacrifice in budgeting among the various ministries of the government,” he said.
Canada can also tighten tax rules to ensure people and companies pay their “fair share,” Flaherty said. “We’ve been closing tax loopholes in every one of the budgets that I’ve done since 2006, and we continue to do that,” he said.
Flaherty also spoke about negotiations in the U.S. Congress over how to replace $1.2 trillion in federal budget cuts over the next nine years that begin today. Of that total, $85 billion would occur in the remaining seven months of the U.S. fiscal year.
“I think the impact is manageable in an economy the size of the United States,” Flaherty said. “The U.S. economy can take a lot of hits. What I’m more concerned about than sequestration is the absence of a medium-term plan.”
Flaherty declined to give an estimate of the budget cuts’ potential impact on the Canadian economy, saying it isn’t yet clear how deep the reductions will be.
Flaherty also didn’t set a date for his next budget, saying he will be working on it this weekend and in the days ahead. Canadian governments traditionally present their plans in the weeks prior to the start of the fiscal year in April.
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