OTTAWA — Talk of a recession in Canada is premature, says Finance Minister Joe Oliver, who insists that the experts say the economy is poised to bounce back after recoiling in the first three months of the year.
Oliver’s testimony Tuesday before the Senate and House of Commons finance committees came less than week after disappointing data showed the economy contracted by 0.6 per cent at an annualized rate in the first quarter.
The contraction of real gross domestic product rang in below most expectations, including the Bank of Canada’s own projection of zero growth.
It also marked the first time the country’s real GDP rate dipped into negative territory since the fourth quarter of 2011 and was the deepest decline since the recession-walloped second quarter of 2009, when it fell by 3.6 per cent.
Nonetheless, projections by the Bank of Canada, the International Monetary Fund and private-sector economists all predicted a second-quarter economic rebound, Oliver reminded the Senate committee.
“I’m not going to be discussing the prospects of a recession, because we don’t anticipate that at all,” Oliver told the committee in response to a question.
“In fact, the governor of the Bank of Canada was quite clear that while he expected a weak first quarter, he expected growth to rebound after that.”
A recession is typically defined as two or more consecutive quarters of negative growth.
The central bank is also projecting that the economy will grow by 1.9 per cent in 2015, Oliver noted. He also stressed that he relies on projections from the 15 private-sector economists who are consulted by his department.
The Harper government, meanwhile, is still projecting a $1.4-billion surplus for 2015-16 despite the weaker-than-expected first quarter, Oliver added.
The steep drop in oil prices and the failure of other sectors to pick up the slack helped push the economy into reverse in the first quarter of 2015.
Released less than five months before the Oct. 19 federal election date, the GDP reading is sure to reverberate on the political scene, where the health of the economy remains a key ballot-box issue.
While appearing before the House committee, Oliver was reminded about the outcry last week over Canada’s weak first-quarter GDP results, including what BMO’s Douglas Porter wrote in a note to clients shortly after the numbers were released.
BMO downgraded its 2015 GDP projection to 1.5 per cent after the GDP figures came out. Porter said if the number holds, it would be the “slowest growth for Canada outside of recession in at least the past three decades.”
Oliver defended the government’s management of the economy. He said most of the economic challenges were due to external factors, like sluggish U.S. growth and the oil-price collapse.
“Had we not been in a relatively strong fiscal situation, the impact (from the oil slump) would’ve been even more severe and we were able to avoid draconian steps or, really, austerity,” Oliver told the Senate committee.
“There wasn’t a need for it, we didn’t do it and that’s a good thing.”
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Andy Blatchford, The Canadian Press