UPDATE 1-Canada to weather financial storm - Flaherty

(Adds details from speech, quotes)

TORONTO, May 12 (Reuters) - Canadian Finance Minister Jim Flaherty warned on Monday of uncertainties facing the economy, but said the nation's books were in order and Canada would weather the current economic storm.

"Our economy is resilient, our economic fundamentals are solid, our budget is balanced and will remain balanced," he said in a speech to the Economic Club of Toronto.

Flaherty has forecast a surplus of C$10.2 billion ($10 billion) for the full fiscal year ending March 30. The money is slated to pay down debt. The surplus for the year starting April 1 is expected to be a much smaller C$2.3 billion and in the following year, only C$1.3 billion.

Flaherty warned of challenges to the Canadian economy from abroad, such as the slowdown in the U.S. economy, particularly in its housing sector, volatility in global financial markets, high energy prices and increased competition from large emerging economies like China, India and Brazil.

Domestically, he pointed to challenges including an aging population and the effects of a strong Canadian dollar on the country's manufacturing sector.

Flaherty added, however, that there were some positives coming from the robust Canadian dollar, such as the increased ability of businesses to invest in new machinery to boost productivity, as well as a damping effect on inflation.

"Canada has been relatively protected from the inflationary trend elsewhere because of the relatively high value of the Canadian dollar, which affects positively the price of imports."

The Canadian dollar has risen about 60 percent since 2002. ($1=$1.01 Canadian) (Reporting by John McCrank and Frank Pingue; Editing by Bernadette Baum)