Flaherty says Canada able to weather global turmoil

Finance Minister Jim Flaherty says Canada’s economy remains stable and growing despite a volatile situation on global markets, but acknowledges that the continued uncertainty poses obvious risks for the country.

Flaherty told reporters Wednesday before his annual summer policy retreat that U.S. and European difficulties have not prevented the Canadian economy from performing relatively well and helping it log seven consecutive quarters of growth.

The finance minister said he is not underestimating the risks, but feels Canada is well-positioned to face global economic challenges.

“Our focus is on creating the right conditions for more jobs and stronger economic growth,” the minister said.

Flaherty said he would stick by the plan in the budget to balance the books by 2014-15 in part by finding $4 billion in annual savings in government spending.

“In an uncertain global economic situation one of the strategic contributions that the government can make to bolster confidence and growth in Canada is to maintain our strong financial and fiscal position.”

Flaherty’s comments follow several days of volatile financial markets that has seen the Toronto stock market drop sharply.

The U.S. Federal Reserve said Tuesday that it would look to keep interest rates at their record lows for the next two years as its painted a bleak picture of the U.S. economy.

Economists expect the move by the U.S. will keep the Bank of Canada from raising interest rates until next year. Investors have also been kept on edge by Europe’s debt troubles, rising inflation in China and slower growth in other less-developed countries.

Flaherty made his remarks as the Conference Board of Canada reported its index gauging the mood of business leaders has slipped due to their less optimistic outlook for the economy.

The business confidence index stood at 103.7, down from 106.2 last quarter and 109.5 in the fourth quarter of 2010.

The survey was done during the last three weeks of June, before the recent turmoil on the financial markets.

Tuesday’s interest rate statement by the Fed followed several volatile days on the financial markets and a downgrade of the creditworthiness of the United States by debt rating agency Standard and Poors.

Investors have also been kept on edge by Europe’s debt troubles, rising inflation in China and slower growth in other less-developed countries.

The Conference Board said business leaders remained generally positive on their financial position and profitability, but predictions about the future of the Canadian economy had worsened.

Just 30.9 per cent of those surveyed believed economic conditions will improve in the next six months, down from 40.6 per cent last quarter.

Those who believed conditions will worsen increased four percentage points to 17 per cent.