Canada's Fiscal Strength Means Commodities Won't Sink

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"Canada has the best fiscal outlook of any G7 country."

Bloomberg, Theophilos Argitis and Greg Quinn

Canada's economy is seen by economists as able to withstand any weakness in commodity prices as it taps strengths that include political stability and the best fiscal outlook of any Group of Seven country.

Prime Minister Stephen Harper's election victory last week allows him to move ahead with his deficit-cutting plans and provide certainty in policymaking that will help support Canada's currency, said David Rosenberg, chief economist at Gluskin Sheff & Associates in Toronto.

"Canada, as an attractive place to invest, transcends the commodity story and a lot of that has to do with political stability and fiscal integrity," Rosenberg said in a telephone interview, adding "the long-term trendline" for commodities "is still pointing up."

Finance Minister Jim Flaherty today made his first major remarks since a May 2 election at a Bloomberg Canada Economic Summit in Toronto, saying he will reintroduce a budget next month. The plan he sent to Parliament in March wasn't passed before opposition parties triggered an early election. Flaherty said he would remain focused on eliminating the deficit and keeping taxes low to boost investment and job creation.

"Our government will continue to maintain the fiscal prudence that has enabled us to avoid the debt and deficit issues some other nations face today," Flaherty said at the summit, adding he aims to have the budget in balance in fiscal 2014-15. "While Canada's economy was sideswiped by this international turmoil, we are recovering better than most."

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