Finance Minister Joe Oliver says his budget numbers are still holding up – even though some economists now predict Canada slipped back into recession during the first half of this year.
Speaking with reporters in Vancouver, Mr. Oliver said his government is monitoring the changing private sector forecasts but noted that the Canadian economy is still expected to show growth for the year as a whole.
"As the numbers come out, we'll see what they have to say," the minister replied when asked why the government is not repeating the view of some economists that Canada is likely in a recession.
The Canadian economy shrunk by 0.6 per cent during the first quarter and some forecasters – including Toronto-Dominion Bank and Bank of America Merrill Lynch – say early indications are that a second quarter of negative growth is likely, which would meet the definition of a recession.
New data released Tuesday showed Canada recorded its second-largest trade deficit ever in May, fuelling speculation that the Bank of Canada may need to cut interest rates further.
When asked whether the federal government is planning any fiscal policy moves to encourage growth, Mr. Oliver noted that previously announced infrastructure spending and increased payments to parents will inject nearly $10-billion into the economy this year.
"That will have a positive impact on Canadian economic activity," he said.
With an October election on the horizon, the slowing economy comes at a time when the Conservatives are attempting to sell themselves to Canadians as solid economic managers. The opposition argues the economic numbers show that the government's policies aren't working.
Mr. Oliver countered that had the government followed the opposition's advice in recent years, Ottawa would be deeper in debt and would have been on the hook for any Greek bailout.
He noted that the Conservatives were criticized by the opposition in 2012 for resisting European pressure to pledge money toward a bailout fund that would be managed by the International Monetary Fund.
"Had we done so, we would now be on the hook for [that pledge] in the context of the Greek crisis," said Mr. Oliver, in reference to Greece's ongoing negotiations with the European Union over its debt.
Mr. Oliver's April 21 budget projected Canada would climb out of deficit in the current 2015-16 fiscal year by posting a $1.4-billion surplus. That forecast was based in part on an assumption that the price per barrel of North American crude would average $54 (U.S.) in 2015 and $67 in 2016. The price of oil has slid by more than eight per cent since Thursday. It closed at $51.98 a barrel Tuesday.
Mr. Oliver said the changing economic picture will not throw off Ottawa's bottom line.
"I've discussed this of course with my finance officials and we're confident that we will see a $1.4-billion (Canadian) surplus this year," he said. "We are comfortable analyzing the data, that we will achieve that budgetary surplus."
Whether or not a 2015-16 surplus is officially achieved won't be known until the final numbers are released in the fall of 2016.
Mr. Oliver also stressed that future growth in Canada will depend on trade. He argued that only the Conservatives can be trusted to deliver expanded free trade through the ongoing Trans Pacific Partnership negotiations, which involve Canada and 11 other countries and are believed to be heating up.