Tags: Canada | End | Stimulus | shaky | Recovery

Canada Set to End Stimulus Despite Shaky Recovery

Monday, 27 Sep 2010 01:04 PM

Canada's government resisted pressure Monday to extend its stimulus spending program despite a slowing economy, saying it is now focused on reducing its budget deficit and has spent most of the money it had earmarked anyway.

Finance Minister Jim Flaherty said the Conservative federal government has committed 98 percent of the C$22 billion ($21 billion) it had planned for the second year of its C$48 billion economic stimulus package, which was aimed at softening the blow of the recession that ended late last year.

But as economists now expect the economy to contract slightly in July, the first monthly contraction in almost a year, Prime Minister Stephen Harper has come under pressure to keep the stimulus tap running beyond the March 2011 end of the program.

Flaherty acknowledged the shaky economic recovery and said the government stood ready to act if necessary.

"In the short term, the government is focused on finishing the job of implementing the economic action plan. We will also continue to monitor economic development closely and will take action as necessary to protect the economic recovery," he told reporters in Montreal.

Flaherty said he was confident the private sector would soon replace the government in stimulating growth.

"We're seeing encouraging signs of domestic growth on the private side returning. That's vitally important ... we've seen this year some increases in the investment in machinery and equipment by Canadian business, which is quite encouraging in terms of future private-sector demand," he said.

Canada's economy has fared better than that of the United States and some other major economies due to strong consumer spending and a robust housing market.

The Bank of Canada became the first central bank in the Group of Seven advanced economies to raise interest rates following the global financial crisis and has now hiked rates three times since June. In contrast, the U.S. Federal Reserve is considering possibly taking further action to boost the economy there.

In its report on the status of the stimulus funds, Ottawa said it has committed federal money to 23,000 projects. It said work on 97 percent of them has begun or has been completed.

Critics say many infrastructure projects, the central plank of the government stimulus plan, will not be finished by the cut-off date. The main opposition Liberal Party is demanding more flexibility so that municipal governments that are unable to complete projects on time do not get stuck with a big bill.

"This is not about new money being invested in stimulus. It means simply completing the current projects and ensuring the current projects are honored by the federal government," said Liberal legislator Scott Brison.

Flaherty suggested there may be some wiggle room, saying the government would be "fair and reasonable" about extending funding for projects that are nearly completed.

In August, Parliamentary Budget Officer Kevin Page warned that project delays could cost Canadian communities C$500 million in forgone federal contributions.

© 2017 Thomson/Reuters. All rights reserved.

   
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Canada's government resisted pressure Monday to extend its stimulus spending program despite a slowing economy, saying it is now focused on reducing its budget deficit and has spent most of the money it had earmarked anyway. Finance Minister Jim Flaherty said the...
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2010-04-27
Monday, 27 Sep 2010 01:04 PM
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