May 26 (Bloomberg) -- Canadian Finance Minister Jim Flaherty said that the 2009 budget deficit will be more than C$50 billion ($44.7 billion) as tax revenue falls.

“We are going through a deeper economic slowdown than anticipated,” Flaherty told reporters in Ottawa today, adding that employment insurance costs have risen, tax revenue has dropped due to the recession, and the government will aid carmakers.

“As a result of all of that we will run a substantial short-term deficit this year, which I would estimate at more than C$50 billion,” Flaherty said.

The projected deficit would be a record for Canada, surpassing 1992’s C$39 billion shortfall. Canada’s low debt levels leave it well-positioned to provide additional stimulus to its economy, and policy makers should be ready to act if the slump intensifies, the International Monetary Fund said May 22.

Canada’s benchmark two-year bond fell 11 cents to C$100.09 today. The yield on bonds maturing in June 2011 rose to 1.205 percent from 1.148 percent late yesterday.

The Canadian dollar strengthened 0.6 percent to C$1.1173 per U.S. dollar at 4:26 p.m. in Toronto, from 1.1241 late yesterday.

Flaherty said the revised deficit for this year won’t prevent the government from returning to a balanced budget in four years. Flaherty said he hasn’t updated next year’s deficit projection.

In his Jan. 27 budget, Flaherty pegged the deficit for this fiscal year at C$33.7 billion.

To contact the reporters on this story: Theophilos Argitis in Ottawa at targitis@bloomberg.net; Alexandre Deslongchamps in Ottawa at adeslongcham@bloomberg.net

Last Updated: May 26, 2009 16:45 EDT