Canadian Prime Minister Stephen Harper said the oil shock rippling through the nation’s economy will only have a temporary impact, making it unnecessary to veer from plans to balance the budget.
After a “mild contraction” in the first half of this year, Canada’s economic growth will return to outpacing most of the developed world, Harper said during an interview Wednesday at his Ottawa office.
“The oil price shocks should be transitory on the Canadian economy,” Harper said, citing Bank of Canada estimates. “It doesn’t in our judgment make sense to plunge our country back into deficit if the economy is actually growing.”
Softness in the world’s 11th largest economy will be a major campaign issue ahead of an Oct. 19 election. The economy contracted modestly in the first half on falling energy investment and surprising weakness in non-energy exports, Bank of Canada Governor Stephen Poloz said July 15 after he cut interest rates for the second time this year.
Harper said that he is “always” concerned about the economy, particularly in a period of “incredible global uncertainty and instability.” The “big picture” though is that “everybody projects the Canadian economy will in the years to come be at or near the top of” the Group of Seven.
The damage from lower energy prices is being countered by increases in infrastructure spending and by tax cuts for families, he said.
Harper has made ending years of deficits a signature promise before the election, and he outlined the dangers of letting the shortfalls continue outside of a crisis.
“There is always a reason to expand the deficit and never get back into balance,” Harper said. “We have done so with low tax rates and preserving our core services and we don’t want to jeopardize those things which are key for growth in the longer term.”