Canada could have larger-than-expected surplus, says finance minister

TORONTO Sun Jan 5, 2014 12:53pm EST

TORONTO Jan 5 (Reuters) - Canada could have a larger-than-expected budget surplus once it eliminates the federal deficit in the 2015-16 fiscal year, the country's finance minister said on Sunday.

"It won't be close. We're in good shape," Finance Minister Jim Flaherty said in an interview with CTV's "Question Period".

"We could have a larger surplus than we anticipate, but we will have a surplus."

In its last fiscal update in November, the finance ministry estimated a surplus of C$3.7 billion ($3.48 billion) in the 2015-16 fiscal year.

Canada had run 11 straight budget surpluses before plunging back into deficit following the 2008 financial crisis. The country's Conservative government has been pushing hard to bring the budget back into balance ahead of the election scheduled for 2015.

Canada's federal budget deficits have paled in comparison with those of the United States, even adjusting for the fact the U.S. economy is roughly nine times as big. Washington posted a $680 billion gap for the fiscal year that ended in September.

Flaherty repeated in the CTV interview the Canadian government is trying to manage a soft landing for the country's housing market. He said the market has shown signs of softening, but he would be prepared to tighten mortgage rules again if needed to cool it.

Flaherty also said the Bank of Canada's Governor Stephen Poloz had told him and provincial finance ministers in a recent meeting the currency could see some weakness.

"He indicated there might be some softening in the dollar. But with the dollar in the 90's somewhere, it's good for manufacturing and we can still travel reasonably," he said.

The Canadian dollar ended the North American session at 93.99 U.S. cents on Friday.

Poloz told Reuters in December the recent Canadian dollar weakening may have been partly caused by sentiment about the U.S. Federal Reserve's plans to taper its latest round of bond-buying. But added he did not want to extrapolate where the currency was headed.

The central bank chief has previous stressed he is focused on inflation and that the value of the Canadian dollar is determined by markets.