This is from the Star.
Many forecasts lately have failed to take adequate account of negative factors. The Flaherty predictions are not actually out of line with others. In fact the Royal Bank gives an even rosier picture than Flaherty. However Flaherty was predicting no deficit at all back in Sept. of 2008.
IMF counters budget's rosy outlook TheStar.com - Business - IMF counters budget's rosy outlook
World body revises forecast for Canada downward, sees a less dynamic recovery than Ottawa predicted
January 29, 2009 Ann PerryBusiness Reporter
The International Monetary Fund expects the global economy to come "to a virtual halt" this year, and says Canada's economic recovery will be far less vigorous than the federal government and the country's central bank are predicting.
The world body yesterday revised its outlook for Canada sharply downward, forecasting the country's economy will grow by a sluggish 1.6 per cent in 2010, after contracting by 1.2 per cent this year.
That view contrasts markedly with the much more energetic rebound Finance Minister Jim Flaherty predicted a day earlier in a big-spending budget aimed at cushioning the blow of the recession.
Relying on average private-sector forecasts, the government expects real gross domestic product will grow by 2.4 per cent in 2010, after shrinking by 0.8 per cent this year.
But it admitted that risks to its outlook "remain tilted to the downside" and adopted a more pessimistic view of nominal GDP, or growth unadjusted for inflation, than the private sector.
Even that relatively rosy prediction pales in comparison to the Bank of Canada's latest projections for real GDP growth of 3.8 per cent next year, following a 1.2 per cent contraction this year.
Mary Webb, a senior economist at Scotia Economics, said the IMF's outlook is in line with her bank's forecast for 1.6 per cent real growth in 2010.
"Our concern is that you still have a financial system and households deleveraging in the U.S., you have a synchronized global downturn that you don't easily emerge from quickly, and this really wasn't a downturn made in Canada," Webb said.
"We do have a lot of stimulus coming into play, and I think it will help us get out of this downturn. Really the question then becomes the degree," she added.
The IMF offered a decidedly gloomy outlook for the global economy.
It is now forecasting global growth to fall to 0.5 per cent in 2009, the lowest rate since World War II and a downward revision of 1.7 percentage points from its outlook late last year.
That will be followed by 3 per cent growth in 2010.
But it warned that uncertainty surrounding its outlook is "unusually large," and that "downside risks continue to dominate, as the scale and scope of the current financial crisis have taken the global economy into uncharted waters."
The IMF expects growth in "advanced economies," a group that includes the United States, Canada, the euro area, Japan and the United Kingdom, to contract by 2 per cent this year, followed by 1.1 per cent growth in 2010.
Emerging and developing economies will see growth slow to 3.3 per cent this year, dropping sharply from 6.3 per cent in 2008.
Meanwhile, the U.S. Federal Reserve left its key policy rate at virtually zero yesterday, and said it expects it to stay at "exceptionally low levels ... for some time."
Noting that the economy "has weakened further," the central bank said it will "employ all available tools" to restart the U.S. economy.
It also said it is prepared to purchase longer-term Treasury securities if circumstances warrant, an unconventional tool that could help push down mortgage rates.