Canada sees little chance of North America recession

Thursday, 9 June 2011 00:00 - - {{hitsCtrl.values.hits}}

MONTREAL (Reuters) - There is little chance that the current North American economic slowdown will turn into another recession, Finance Minister Jim Flaherty said.

“I do not think the risk is great,” Flaherty told reporters at an economic conference in Montreal.

“The nature of the risks have not changed,” he added, pointing to the need for a convincing long-term plan in the United States to deal with deficit and debt issues.

Flaherty said he is concerned about the continuing slump in the U.S. real estate market, which puts a damper on consumer confidence south of the border. He said he is also worried about European sovereign debt, that of Greece in particular.

He said, however, that these are all known risks, which were factored into economic assumptions in the 2011-12 federal budget that Flaherty unveiled on Monday.

In the budget, the Conservative government reasserted its aim to make Canada the first Group of Seven industrialized country to return to balanced books.

Flaherty’s budget formally projected deficits through 2014-15, when it sees a C$300 million gap. But Flaherty said the government should actually be able to run a C$3.7 billion surplus that year by cutting spending.

The government also outlined a plan to return to pre-crisis levels of debt-to-GDP ratios, returning to 29 percent by 2015-16. The debt-to-GDP ratio for 2010-11 was 34 percent.

The budget is almost identical to the one Flaherty presented in March but which never came to a vote before the then-minority government was toppled by the opposition parties.