Several economists painted a bleak picture of the economy for the House of Commons finance committee Tuesday, as it began its pre-budget consultations.
Though the economists did not agree on whether the economy was headed into a double-dip recession or if Ottawa should launch another round of stimulus spending, they all outlined a troubled outlook.
BMO Capital Markets deputy chief economist Doug Porter told the MPs that growth will be very modest at best for this year and next.
"While we continue to believe that Canada and the U.S. will manage to claw out some growth over the next year, it looks to be very modest at best," Porter told the committee.
"Given such subdued growth I would say that it would really only take one more negative shock to basically tip the economy over into an outright downturn."
Worries about Europe's debt crisis and the tepid economic recovery in the U.S. have raised concerns about what the fallout will be in Canada.
Carlos Leitao from Laurentian Bank Securities tried to differentiate between the economic difficulties in Europe and the Canadian situation. "I wouldn't put Canadian austerity in the same league as Greek austerity," he said, adding he doesn't see a need for Canada to change course or offer massive spending cuts.
Finance Minister Jim Flaherty and Bank of Canada governor Mark Carney will meet Prime Minister Stephen Harper on Tuesday afternoon to talk about the economy.
Flaherty and Carney are just back from meeting with their G20 counterparts in Washington over the weekend.
At the finance committee, Porter sided with those who did not believe another round of stimulus spending was needed just yet, but he urged the government to be cautious and flexible.
"In this kind of environment, caution really is the watch word," Porter said.
However the committee also heard calls for spending on infrastructure projects from Sylvain Schetagne, senior economist at the Canadian Labour Congress.
"Public investments remain our last recourse," he said.
Schetagne also expressed skepticism that another round of corporate tax cuts would be wise, saying that profitable companies don't always reinvest their tax savings in ways that most benefit the economy. He prefers targeted policies like public infrastructure spending to create jobs.
Economist Marc Lavoie agreed. "I would say the first inefficient program that should be cut is the reduction in corporate income taxes," he suggested.
"I would say that the prudent policy now would be to increase government expenditures," Lavoie suggested, noting recent negative signs in the economy.
Glen Hodgson, chief economist at the Conference Board of Canada, noted that the government should not be afraid of delaying its plan to balance its budget by 2014-15 by a year or two amid the changing global circumstances.
"It's not a matter of staying the course, it is being prepared to make common sense course corrections along the way depending on the needs of the economy," he said.
"I don't think the economy needs more fiscal stimulus right now, but I wouldn't close my mind to it either in the event that circumstances turn out much worse," Hodgson added.