Finance Minister Jim FlahertyPool
It's too early to be talking about economic recovery from the global recession, a cautious Finance Minister Jim Flaherty said after a meeting of finance ministers from the Group of 20.
Speaking from London, Mr. Flaherty said Saturday the ministers agreed the world economy is stabilizing but "no clear recovery is evident."
It's prudent to remain cautious because there are still fears of a slip back into recession, he said.
"The consensus here is that the global recovery is stabilizing but recovery is not established," Mr. Flaherty said via teleconference.
"We agreed that we are not out of the woods and that we must stay the course. . . . We must all remain focused on fully implementing our stimulus packages."
The G20 finance officials met in the British capital to discuss the next steps for the recovering global economy and lay the groundwork for the G20 leaders' summit in Pittsburgh later this month.
The top finance officials from rich and developing countries agreed to curb hefty bankers' bonuses and pledged to maintain stimulus measures such as extra government spending and low interest rates.
"The financial system is showing signs of repair," said U.S. Treasury Secretary Timothy Geithner. "Growth is now under way.
"However, we still face significant challenges ahead."
The G-20 joint statement said fiscal and monetary policy will stay "expansionary" for as long as needed to reduce the risk of a so-called double-dip recession.
"I would be cautious about talking about early stages of recovery," Mr. Flaherty said. "We're being very cautious because we fear going back into recession.
"We're also very concerned about unemployment"
Canada's latest unemployment figures, released Friday, had the rate at a 10-year high of 8.7 per cent, though Statistics Canada reported the economy created 27,100 new jobs in August.
The pivotal private sector finally kicked into gear after 11 months of shedding jobs: it added 49,200 workers.
Although most of the new net jobs were part-time positions, economists said any growth so early in the recovery is significant.
Liberal Leader Michael Ignatieff insisted the developments would not change his plans to topple the government this fall, saying Friday he still believes the Tory government has badly mismanaged the economy and deserves to be defeated.
Both the New Democrats and Bloc Quebecois must vote with the Liberals in order to topple the minority Conservatives.
Mr. Flaherty said a federal election will only serve to "disrupt" government when Canada needs to focus on economic growth, helping the unemployed and continued stimulus to the economy.
As of June, he said, 80 per cent of federal stimulus monies were being implemented. The International Monetary Fund called Canada's economic strategy "large, timely, well-diversified and structured for maximum effectiveness."
The IMF has raised its estimate for global economic growth in 2010 to 2.5 per cent from an April projection of 1.9. But the IMF also downgraded its forecast for this year, saying it would shrink by 1.4 per cent, instead of 1.3 per cent.
Some reports indicate Canada's federal deficit could balloon past its projected $50-billion this fiscal year.
Still, Mr. Flaherty said Ottawa does not plan to increase taxes - "we do not intend to increase taxes" - or reduce federal transfers to the provinces.
"We have no intention of following that terrible example of the Liberal governments of the 1990s," when transfers were slashed and provincial health, social and educational programs suffered.
"There are other options that the government has with respect to moving towards surplus overtime, and we're looking at those options."
Those options include revenue from mild economic growth and spending reductions in areas "that do not include transfers to persons . . . . and provinces."
Mr. Flaherty, who will deliver his third economic report to Parliament when MPs return from their summer break later this month, said the economy is moving in the right direction.
He said he would not set any date by which he expected the government to move back into a surplus position - a shift from prior predictions that spending could be out of the red by 2012-13.
"We are, of course, looking at this issue carefully. We are going to move towards surplus."
He said the past year has been "wracked by crisis" and called it "the most difficult year, in economic terms, since the end of the Second World War."
"When you consider the financial turmoil the world was undergoing just a year ago, it's evident that the collective response by our nations is making a difference," he said.
"The global outlook has improved; credit conditions continue to ease, and the IMF expects the global economy to grow in 2010."