Federal Finance Minister Jim Flaherty said Wednesday that Canada will fall into deficit during the next fiscal year as recessionary economic forces continue to slowdown the world's economy.
"2009 is going to be a difficult year for Canada and for Canadians," Flaherty said in Saskatoon, where he is attending an economic summit with finance ministers from across the country.
While Canada remains in a stronger position than the U.S., Flaherty said the domestic economy has been hammered by plummeting commodity prices and a limp housing market.
When asked if Canada would be in the black next year, Flaherty stated: "No, there will be a deficit."
"It's quite clear on the basis of the forecasts," he said, noting that the books remain balanced for this fiscal year.
The Saskatoon summit comes as provincial and federal governments work to put together a stimulus package for the slumping Canadian economy in an attempt to halt a dramatic slide in economic growth.
In only one month, Canada's GDP growth has fallen from 0.3 per cent to a negative number of 1.4 per cent, said Flaherty.
"The U.S. recession continues unabated and the U.S. housing market has not hit bottom yet, and the predictions in respect to Canadian growth reflect that factor."
He added that the federal government will double infrastructure spending next year to $6 billion, and he noted that Ottawa has already earmarked about $3.5 billion in restructuring loans and financing for the auto industry.
Other sectors that were discussed during the meeting include the forestry and fishery industries, said Flaherty, adding that all of the economic ministers have pledged to "share the burden" to help put Canada's economy back on track.
"We are going to try and accelerate the system together," said Flaherty, adding that more sectors in the Canadian economy will face increased risk over the next year.
"This is going to grow - we're going to have more concerns about more sectors in the economy as we go through 2009."
Earlier in the day, Flaherty pledged to get a stimulus package together as soon as possible.
"That's very important, that they be ready, and secondly that they be a co-operative effort, that the provinces and territories contribute to the effort."
Flaherty, whose recent fiscal update almost led to the government's collapse, said he is in the midst of a broad and deep consultation ahead of the January federal budget.
He said he is talking with industry representatives, both levels of government and members of his caucus, and has asked for input from all MPs in the House of Commons.
However he added that consensus among the different stakeholders "is not essential."
"It will be a conservative budget but it's clear we have to take additional steps to stimulate the economy, so I welcome advice," Flaherty said.
Though most of the ministers appear to agree on the need for infrastructure spending, others have industry-specific needs.
Ontario's concerns focus on the auto industry, for example, while the struggling forestry and agriculture sectors are top of mind for other provinces and territories also trying to balance their books.
Flaherty said the struggling North American auto sector will face more challenges before the situation gets better -- and cuts can be expected.
"It's realistic to acknowledge there's over-capacity in the auto industry overall in North America and that there will be some reduction in the size of the industry, that's just based on sales of vehicles in North America and what's likely to happen in the future," he told Canada AM.
The federal government is prepared to "react quickly" to help the industry if the Canadian automotive situation worsens, but it won't come in the form of a blank cheque.
"It's going to require some terms and conditions with the industry and all of the participants in the industry. It isn't just a question of the government of Canada and the government of Ontario providing a solution."
He said the global recession is getting worse, but Canada is still in a stronger economic position than the U.S. and "we'll come out of this stronger."
