Prime Minister Stephen Harper says Canada was the last country to enter the global recession and is well positioned for recovery. (Chris Young/Canadian Press)

Former Bank of Canada governor David Dodge told CBC news on Wednesday he didn't intend or expect to get into a public disagreement with the prime minister when he said earlier the Harper government's rosy economic recovery forecasts were unrealistic.

"I just don't think now — as things have developed between December and March — that one can be quite so sanguine that the world is going to recover quickly," he said. "And if the world doesn't recover quickly, it's very, very difficult to see Canada recovering quickly."

But Prime Minister Stephen Harper, speaking in Toronto, where he made a $10-million funding announcement for young entrepreneurs, defended his government's optimism on Wednesday. He cited a comment from the International Monetary Fund last week that said "our macro-economic policies are exactly the appropriate policies for today's situation."

Dodge made his initial comments about the economic recovery in an interview Tuesday, when he said the recession likely won't end later this year and will fundamentally alter capitalism.

Harper has boasted Ottawa will be back in surplus by 2013, but Dodge called that "totally unrealistic."

The prime minister, without specifically mentioning Dodge, denied his view of the Canadian economy is overly optimistic.

"The reality is this: Things are very tough," he said. "We know that. But Canadians should not lose sight of the fact that we remain in a relatively good position compared to other countries."

Harper noted Canada has not had to subsidize its banks, has a low and stable inflation rate, and has a diverse economy that should help the country weather the storm.

The Bank of Canada has forecast a fast turnaround for Canada, with growth resuming in the second half of this year and soaring to 3.8 per cent next year.

But Mark Carney, the central bank's current governor, suggested last weekend the global economy is deteriorating faster than expected, and the next forecast in April will reflect that pessimism.

Dodge questions GST cut

Dodge on Wednesday repeated earlier criticisms of the government's recovery plans, saying they focused too much on the short-term picture.

"We've put a lot of emphasis on 'shovel-ready' [projects], i.e., things that have got to start on the first of April, and not quite as much emphasis on what needs to be done to equip us for the long term," he said.

Dodge also criticized the government's move to cut the Goods and Services Tax by two percentage points, to five per cent from seven per cent. If the government was looking to reduce taxes, he said, income taxes "would have been the better to cut."

"And if we're going to have to increase taxes, the consumption tax is a better tax to increase," he said.

But Harper stood by his move to reduce the GST, saying the cut better equipped the country to weather turbulent economic waters by boosting consumer confidence and sustaining spending.

"Let me assure you that while our opponents may favour raising the GST back up, this government will not do that," he said.

With files from the Canadian Press