Harper rejects stimulus to deal with Canada's 'downturn'
Published Saturday, July 11, 2015 2:16PM EDT
Last Updated Saturday, July 11, 2015 11:23PM EDT
In the face of a nationwide "downturn," Prime Minister Stephen Harper said he won't pour billions into stimulus spending and will opt to stay the course on the economy.
The country has been mired in an economic slump, which caused four major banks to declare earlier this week that Canada is in a recession. A Statistics Canada report also showed that the economy shed 6,400 jobs in June.
However during an announcement in Pickering. Ont., on Saturday, Harper refuted the label of recession and blamed the decline on recent turmoil in the global economy and a drop in oil prices.
"Let me just state clearly what the situation is, there has been a downturn and the reason for that has been the downturn in the global economy," said Harper.
"We do not spiral ourselves into deficit so that we have credit downgrades. We do not start hiking taxes on business so that we have an investment freeze," said Harper.
But some economists say Ottawa should consider new stimulus money if the economy continues to slide.
"This is the time when the government has the opportunity to indeed step up spending for significantly important infrastructure, and with interest rates low it costs very little," Sherry Cooper, chief economist for Dominion Lending Centres, told CTV News.
The Bank of Canada will issue its own response to the country's economic woes next week. It could opt to hold its key lending rate steady or make another cut.
Several of the country's big banks have predicted the central bank will opt to make a rate cut because Canada's GDP contracted for the fourth straight month in April. A recession is defined as two quarters of negative growth.
However, some experts believe that massive stimulus spending is a safer choice because rate cuts contribute will contribute to the country's red hot housing market and could drive consumers deeper into the red.
"Household debt in Canada is at an extremely high level, so it's not clear how much stimulus you would get from a rate cut," said Charles St-Arnaud, executive director of Foreign Exchange Research and Economics.
Concerns arose earlier this week about Canada's sluggish economic performance after Statistics Canada revealed that the country's trade deficit grew to $3.34 billion in May and that the trade balance is heading for a record deficit in the second quarter.
But Finance Minister Joe Oliver said it was too soon to tell whether Canada was in a recession.
"The numbers aren't out yet," Oliver said Tuesday in Vancouver. "When the numbers are out we'll see what they have to say."
Oliver said that he remains confident that country will achieve the Conservative's promise to finish fiscal year with a $1.4 billion budget surplus.
On Thursday, the International Monetary Fund said that tempered its expectations for Canada's economy, but still expects it to grow by 1.5 per cent.
The banking group pointed to a fall in oil prices as the reason for the hit.
And with 99 days remaining before the October 19 election, a lurching Canadian economy could be the defining issue.
"They want to take credit for the economy but they blame every other party, every other fact when it's not going well and they have to take responsibility," said NDP MP and international trade critic Don Davies.