POLITICS
08/10/2011 01:03 EDT | Updated 10/10/2011 05:12 EDT

Jim Flaherty: Canada's Economy Can Weather This Storm

CP

WAKEFIELD, Que. - Canada's economy remains stable and growing despite a volatile situation on global markets, but Finance Minister Jim Flaherty acknowledge Wednesday that the continued uncertainty poses obvious risks for the country.

However, the minister, said he will stick with his plan to balance the government books by 2014-15 in part by finding $4 billion in annual savings in government spending.

"In an uncertain global economic situation one of the strategic contributions that the government can make to bolster confidence and growth in Canada is to maintain our strong financial and fiscal position," he said.

"We will stay the course. We will stay on track. We will continue with the plan."

Flaherty told reporters Wednesday before his annual summer policy retreat that U.S. and European difficulties have not prevented the Canadian economy from performing "relatively well."

"Our focus is on creating the right conditions for more jobs and stronger economic growth," the minister said.

Flaherty's comments follow several days of volatile financial markets that has seen the Toronto stock market drop sharply.

The Canadian market clawed back some of its lost ground Wednesday — gaining about 89 points — but Wall Street stocks plunged more than 500 points as investors' attention returns to the weak economy and Europe's debt problems.

The U.S. Federal Reserve said Tuesday that it would look to keep interest rates at their record lows for the next two years as its painted a bleak picture of the U.S. economy.

Economists expect the move by the U.S. will keep the Bank of Canada from raising interest rates until next year. Investors have also been kept on edge by Europe's debt troubles, rising inflation in China and slower growth in other less-developed countries.

NDP finance critic Peggy Nash said Flaherty wasn't doing enough to cushion the economy from another slump.

"What we would have liked to have seen was a little more flexibility on the part of the minister," she said.

"We know that the government has a plan going forward in terms of cutting public spending and deficit reduction, but what we don't need right now is rigidity or even an ideological approach to our finances."

Nash said Flaherty should have signalled he was open at looking at infrastructure spending as a way to deal with the uncertain times.

The Conference Board of Canada reported Wednesday its index gauging the mood of business leaders has slipped due to their less optimistic outlook for the economy.

The business confidence index stood at 103.7, down from 106.2 last quarter and 109.5 in the fourth quarter of 2010.

The survey was done during the last three weeks of June, before the recent turmoil on the financial markets.

The Conference Board said business leaders remained generally positive on their financial position and profitability, but predictions about the future of the Canadian economy had worsened.

Just 30.9 per cent of those surveyed believed economic conditions will improve in the next six months, down from 40.6 per cent last quarter.