* Finance Minister: More gov't "sacrifice" may be needed
* Lower-than-forecast growth hitting revenues
* Expects forecasts used in budgeting to be downgraded
* Frustrated by U.S. fiscal failures; Europe a bigger threat
By Louise Egan and Randall Palmer
OTTAWA, March 1 Slow Canadian economic growth
means the government will have lower revenues than initially
forecast in drawing up the next budget and some ministries may
need to cut spending further, Finance Minister Jim Flaherty said
He said he continues to plan to eliminate the federal
government's relatively small deficit by 2015 in spite of the
"We also look at program spending, that's true too. And we
can do some more tightening there if necessary," he told
reporters when asked how he would adapt the budget to account
for weaker-than-expected growth.
"But we start with a premise that we're going to balance the
budget in 2015 and it may need some more sacrifice in budgeting
among various ministries of the government," he said.
Canada said goodbye to over a decade of budget surpluses
during the global financial crisis when it pumped stimulus cash
into the economy and felt the effects of previously announced
tax cuts. The ruling Conservatives expect a deficit of about
C$25 billion in the 2012-13 fiscal year, or about 1.4 percent of
the size of the economy, and have vowed to balance the books in
time for the next election in 2015.
Flaherty, who said continued deficits are "not an option",
expressed frustration at Washington's inability to come up with
a credible fiscal plan, speaking as the White House and
congressional leaders failed to reach a deal to avoid $85
billion in spending cuts, also known as the
Ottawa says the cuts will shave 0.4 percentage point off
U.S. growth. Flaherty could not say what the impact would be on
Canada, but said it was unlikely to be huge as long as the U.S.
economy is growing. The bigger threat to global stability right
now is Europe, he said.
Flaherty was speaking after data on Friday showed sluggish
Canadian economic growth in the fourth quarter for the weakest
six months since the recession.
The deep discount on Western Canadian crude versus imported
oil is also having a "significant" impact on corporate tax
revenues, he said.
Flaherty said he expects private sector forecasters to lower
their 2013 growth assumptions, on which the budget is based.
"Next Friday ... I will meet with the private sector
economists here and I expect, and I'm sure you all expect too,
that their projections will be lower than they were the last
time we met in the autumn," he told reporters.
"(This) means I will have to account for that in our budget
projections including the revenue projections, which I will do.
And we will stay on track to a balanced budget in the
medium-term," he said.
Another way of finding savings includes closing tax
loopholes, he said.
Flaherty is widely expected to deliver the budget in late
OPPOSITION SAYS MORE CUTS A MISTAKE
The main opposition party, the New Democratic Party (NDP),
immediately slammed the idea of additional spending cuts, saying
it would harm the already stumbling economy.
NDP legislator Guy Caron urged Flaherty to invest in
long-term infrastructure projects and restore funding to public
services that were hit in the 2012 round of cutbacks, which he
said could save as many as 120,000 jobs.
"They are compounding the mistakes they have done, with the
cuts they have imposed, and if they go even further I think
we'll see an impact on the Canadian economy," Caron said.
Ian Lee, at Carleton University's Sprott School of Business,
rejected Caron's idea that the weak Canadian growth was partly
because of the 2012 budget cuts, blaming instead the weak
economies in the United States and Europe.
Small as Canada's fiscal shortfall may be compared to that
of the United States or United Kingdom, it needs to be addressed
now, he argued.
"For the last 40 years, western countries, all the OECD
countries, have been borrowing, borrowing, borrowing, and we
went from about 30 percent of GDP in the 1960s, we're now up to
80 or 90 percent," he said.
"And so that argument is I think a facile argument, because
you continually kick the problem down the road and never
confront the problem."