Flaherty’s economic update is an early warning
You didn’t really think it was going to be good news when Finance Minister Jim Flaherty schlepped all the way to Fredericton, N.B., to deliver the fall economic update, did you?
And sure enough, there wasn’t a unicorn or a butterfly in sight.
That said, as efforts to manage expectations go, these economic updates have become a useful tradition. Not only do markets — and voters Ć hate surprises. But things change pretty darn fast in these days of globally entwined trading.
Essentially, much of what we already surmised was confirmed: the shortfall for the 2012-13 fiscal year will be $26 billion, up $5 billion from the March budget estimate of $21 billion. Deficit forecasts have also been adjusted and extended. The forecast is now for a balanced budget in 2016-17 — a year later than expected and with more than just a whiff of wishful thinking.
The Finance Department continues to stand by its recently adjusted forecasts for economic growth: 2.1 per cent for 2012, 2.0 per cent for 2013 and 2.5 per cent in 2014.
Those targets may soon look ambitious, however. Not because of what Flaherty said in his update remarks (which included the now-familiar refrain about consumer debt levels) but because of what he didn’t say.
The truth is that Canada is increasingly being painted into a small and dangerous corner — by international forces it doesn’t control and by domestic issues it has very little control over. Not that the Finance Minister mentioned these problems.
Here’s the deal: The confluence in the U.S. of a protracted recession, conservation initiatives and increased domestic oil and gas production (the International Energy Agency now predicts the U.S. will be one of the world’s biggest oil producers by the end of this decade) mean that the largest, closest market for Canadian energy exports is shrinking. But at the same time, provinces and other stakeholders have been unable to agree on how — or if — to proceed with construction of the pipelines required to access new markets in Asia.
That presents a potentially dire outlook for this country’s economy.
As a net exporter of raw materials — oil, gas, minerals and lumber — it’s very clear that the prolonged global recession has already been hard on Canada’s national bottom line. It’s taken a bite out of tax revenues, employment prospects and corporate confidence. Not to mention those budget deficit targets that keep getting pushed back.
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