UPDATE 1-Canada's Harper sees brighter 2014, cites U.S. growth

Mon Jan 6, 2014 1:19pm EST

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By Julie Gordon

VANCOUVER Jan 6 (Reuters) - Canadian Prime Minister Stephen Harper said on Monday he is more optimistic about the economy in 2014 than in past years because of evidence of stronger growth in the United States and a comeback in Europe.

While the export-dependent Canadian economy will inevitably be buffeted by global ups and downs, its fundamentals are strong, Harper said, citing the country's fiscal record, banking sector and labor force.

"As we move into 2014, I'm a little more optimistic this year than I've been in past years," he said in a moderated discussion in front of a Vancouver business audience.

"I think Europe, while its challenges are longer term, has hit the trough and is beginning to come back. I see real evidence of growth taking hold in the United States," he said.

Harper also spoke about the need for Canada to diversify its markets for crude oil, expressing confidence the stalled Keystone XL line would eventually proceed.

Canada's economy sped up in the third quarter to grow by 2.7 percent on an annualized basis, after a slow patch earlier in the year. But economists take little comfort from the fact that growth is largely driven by debt-ridden consumers, with business investment and exports still not ramping up as expected.

Chronically low inflation has prompted the Bank of Canada to indicate it has no plans to raise interest rates any time soon.

Harper blamed the low inflation for lower-than-expected government revenues, although he repeated that the Conservative government was on track to meet its promise of eliminating a deficit by 2015.

"Income growth has been a little bit slower than we'd hoped, not so much because economic growth hasn't been where we want it ... It's been that our inflation rate has been so low that the government's actual nominal income from which we gain revenue has been a little bit slower than anticipated," he said.

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