OTTAWA - Finance Minister Jim Flaherty on Friday blamed Canada’s lower than expected economic growth on “weakness in the global recovery” as he vowed to stay the course to a balanced budget in 2015.
Canada’s economy grew 1.8 percent last year, slightly less than the central bank’s forecast and down from 2.6 percent in 2011, the government statistics agency announced earlier.
Flaherty told reporters that 2013 forecasts will be lowered after he meets with private sector economists next Friday as part of the budget planning process, “which means that I will have to account for that in our budget.”
But he added: “We will control our own spending, and we will stay on track to a balanced budget... in 2015.”
According to Statistics Canada, gross domestic product in the fourth quarter was up 0.2 percent, similar to the previous quarter’s paltry gains, as an uptick in mining and petroleum was offset by a plunge in manufacturing.
The arts and entertainment sector, transportation and warehousing, and wholesale trade also declined, while construction, the public sector, utilities and the finance and insurance sector increased in the fourth quarter.
“Growth well below potential appears to be the status quo for the Canadian economy,” commented CIBC World Markets economist Emanuella Enenajor.
Canada posted the strongest quarterly GDP growth rate of any Group of Seven industrialized nation.
But BMO Capital Markets chief economist Douglas Porter downplayed the achievement as “akin to being the most graceful and lithe hippo in the zoo—the competition ain’t tough.”
Government figures showed crucial household spending was up in the last quarter of 2012. Disposable income also inched up, but Canadians saved less.
Government spending meanwhile rose slightly at the end of the year following an anemic 12 months. Growth in government spending has slowed every year since 2008.
Business investment in machinery and equipment meanwhile continued to be weak, with fewer purchases of heavy trucks and buses, and more aircraft and computer outlays. Exports edged up, while imports were down. Business inventories meanwhile were “sharply” lower, according to Statistics Canada, pointing to dwindling sales ahead.
All major industrial sectors made gains over the course of 2012 except for public administration and the arts and entertainment sector, which was affected by a months-long National Hockey League player lockout.
Trade volumes slowed considerably, with exports rising at one-third their pace in 2011 and imports growing at half their pace. New home construction was up 12.8 percent in 2012.
The Bank of Canada has forecast growth of 2.0 percent this year, while the International Monetary Fund has predicted 1.8 percent growth.
But Porter said after a “sickly” tail end of 2012, “the economy has some serious work cut out for it to get back on track,” predicting it will “recede a bit further this year, struggling to top 1.5 percent for all of 2013.”
Flaherty was tightlipped about budget specifics, but said the government would keep taxes low while closing loopholes, tighten spending where necessary and require “more sacrifices” from several ministries.
He vowed more “targeted investments to support key economic drivers,” but said there would be “no new risky spending schemes.”