More questions emerged Wednesday about Canada’s economic health with the International Monetary Fund downgrading its outlook, but the country’s Finance Minister maintains the economy is in good shape.
Canada’s finances are “in a position to withstand the unexpected and the unavoidable which comes from outside our borders,” said Joe Oliver in an interview.
Oliver said that he’s comfortable that despite signs our economy has slowed, it is not stopping.
On Wednesday, the IMF issued a revised, downward outlook for the global economy, seeing growth falling to 2.2 per cent this year from an earlier 3 per cent. The IMF also predicted Canadian growth would be 1.5 per cent for the year, down from an April forecast of 2.2 per cent.
The news followed an analysis by TD Bank on Monday that argued the country was in recession, which is defined as two quarters when output declines.
TD believes the effect of lower oil prices will get worse and called for another cut in interest rates by the Bank of Canada.
That rate cut idea was endorsed Wednesday by the Bank of Montreal and Royal Bank. Central bank governors meet July 15 and economists are calling for a 25 basis point cut in the key lending rate which now stands at 0.75 per cent.
Oliver said he could not comment on the need for a rate cut, saying that policy is determined by the Bank of Canada.
But he did say that his government is on track to return a budget surplus as promised.
“We have a Triple-A credit rating which very few countries have, none as large as ours,” said Oliver. “We have a debt-to-GDP (ratio) that is half of the G7 average.
“We’d like to see growth higher, but we do see the U.S. picking up and our economy picking up, too. But we’re not immune to the tumult outside our borders.”
He said the global recovery “has been a serial disappointment” and what recovery has taken hold, is fragile. China is slowing and has faced a huge stock market sell off. It’s uncertain whether that will spread to the broader economy. Europe’s recovery has been mediocre and it now faces uncertainty with Greece.
“You don’t want to exaggerate the Greek situation,” said Oliver. “It’s less than 2 per cent of the European economy, but on the other hand it’s causing instability because there’s a psychological and economic aspect to it.
“All these things affect Canada, because we’re a trading nation and it impacts on our prospects.”