Days after indicating he's worried about the possibility of another global downturn, Finance Minister Jim Flaherty meets Tuesday with Canada's top economists to seek advice on whether he should revise Ottawa's forecasts.
Mr. Flaherty will be discussing the economic projections in next week's budget, and whether they should be changed from the forecasts in the March 22 fiscal plan that was never passed.
His original budget projected economic growth in Canada of 2.9 per cent this year, but his view of the economy appeared to take on a more negative tone Sunday, when he told CTV's Question Period he was "quite worried" about the global economy sliding into another slump, or something that feels like one, sparked by developments outside of Canada.
It was unclear what prompted Mr. Flaherty's language, as first-quarter economic growth numbers released by Statistics Canada came in largely as expected.
Some critics say politics explains part of Mr. Flaherty's language, noting that the self-congratulatory words of the election campaign, when the Conservatives billed themselves as the stewards who steered Canada through the slump, have given way to more concern. Still, fear for Canada's "fragile" economy was also a constant theme of Prime Minister Stephen Harper's campaign stump speeches, which featured repeated warnings that "a sea of troubles is lapping at our shores."
Mr. Flaherty and other policy makers have long argued that the biggest risks to export-dependent Canada are external, much like in 2008 when strong fundamentals and a solid banking system weren't enough to keep the economy from falling into a deep recession when spending by U.S. consumers and businesses plunged.
Speaking in Toronto Monday shortly after the Statistics Canada report showed the economy grew at an annual pace of 3.9 cent between January and March, Mr. Flaherty reiterated this theme and echoed comments by many economists who say growth is already slowing from that pace.
"I think we just have to continue to expect that we're going to have modest, moderate growth during the year and going into next year," he said. "The worries that we have are not so much within Canada as they are outside the country."
Bank of Canada Governor Mark Carney is expected to leave his benchmark interest rate at 1 per cent Tuesday, and economists increasingly say a drop-off in consumer spending and a host of concerns from outside of Canada could keep him on hold until fall. Mr. Carney recently indicated he is particularly worried about the impact that lofty commodity prices are having on U.S. demand for other exports, at a time when currency and competitiveness issues are already holding back Canadian companies' fortunes.
Add in Europe's worsening debt crisis and the temporary but significant impact of Japan's natural disasters on North American supply chains, and there's plenty to keep policy makers up at night.
Opposition finance critics accused Mr. Flaherty of speaking more candidly now about the challenges Canada faces after painting a rosier picture during the federal election campaign.
"What he's saying reflects what we've been saying," said NDP finance critic Peggy Nash. "He's expressing concern that he didn't express during the election."
Since the election, the European crisis has entered an arguably more precarious phase.
Politicians in Greece have been unable to agree on austerity measures required for bailout funds that must keep flowing to avoid default, and bond yields in some parts of Europe continue to climb.
In his comments to CTV host Craig Oliver, Mr. Flaherty indicated he is particularly worried about the "very difficult situations" in Europe, as well as the "significant" fiscal mess in the United States. Mr. Stephen Harper was in Greece over the weekend and discussed the Greek debt impasse with political leaders there, Mr. Flaherty noted, adding that he recently met with fellow conservative legislators in Washington to discuss U.S. budget issues.
However, while economists agree the problems facing some of Canada's most important trading partners will be tough to solve and could hit Canada, most predict the world economy will keep growing. Last week, the Paris-based Organization for Economic Co-operation and Development said that while fiscal shortfalls could be a drag on the global recovery, the world economy will still grow 4.2 per cent this year and 4.6 per cent in 2012.
Canada's growth will be more like somewhere between 2 and 3 per cent, according to most forecasts, since the global recovery is being driven by rapidly growing developing nations like China and India.
But analysts see Canada faring as well or better than the other so-called advanced economies that were hit the hardest by the last slump and are grappling with unemployment and debt.
"There's concerns that things could turn out a little bit softer than previously expected, but in terms of a double-dip, we still think that the odds are quite low," said Emanuella Enenajor, an economist with CIBC World Markets in Toronto.
A minority of forecasters are less optimistic.
David Madani, a Canada analyst with Capital Economics, said the unsustainable debt problems that came from U.S. housing and the market for subprime mortgages have merely been shifted to unsustainable debt loads held by European countries and their banks.
"Essentially we've transferred the problem rather than eliminated it," he said. "We're definitely not out of the woods, by any stretch of the imagination.''
With files from reporter Greg Keenan in Toronto
Bill Curry