Finance Minister Jim Flaherty says he's not expecting a recession in Canada, but will be flexible on the issue of stimulus spending if conditions worsen.
Flaherty made his comments Tuesday at a news conference in Ottawa after meeting with private sector economists to consult on their expectations for growth.
Afterward, Flaherty said the economists had lowered their expectations from their estimates in the spring.
"The private sector economists are saying now that they anticipate real GDP growth for this year in Canada for 2011 at 2.2 per cent. In March they thought 2.9 per cent ... It is a significant downgrading but it is relatively modest."
The economists' forecast "is not doom and gloom," he said. "There is continuing to be a forecast of modest growth in Canada."
How well both European and American politicians deal with their respective debt problems will have implications for Canada, the minister said.
"But tomorrow, there could be quite a gloomy day if the Europeans … cannot come up with a rescue plan that will satisfy the world and particularly investors who are looking at this with great trepidation," he said.
"Canada is not immune to those recent global pressures and they will continue to limit growth in Canada for the remainder of this year and in 2012," Flaherty said.
Flaherty said he expects to stay on track for a balanced budget, despite the Bank of Canada's lowered prediction for national economic growth this year.
Earlier Tuesday, the bank said the economy likely expanded at a modest 2.1 per cent — most of it in the first quarter — and will fare even worse at 1.9 per cent next year.
Both numbers were 0.7 percentage points lower than the bank had projected in July.
Slower growth will make it more difficult for Canada's 1.4 million unemployed to get work and lower the 7.1 per cent national unemployment rate.
Flaherty hedges on timing of balanced budget
Asked directly if 2014-15 was still the target for returning to balance, as promised in the spring election, Flaherty avoided a clear date, preferring to use the more generic "medium term" for a goal.
"We have some work to do to make sure we can stay on track. I'm not going to be inflexible," Flaherty said.
"We will stay the course, we will maintain the fiscal track so we can achieve a balanced budget in the medium term."
Flaherty said the federal government will release a new fiscal update in the coming weeks with a revised outlook for the national economy.