World economy still growing slowly: Canada

OTTAWA: The world economy is still growing slowly, although Europe and the United States need "difficult and bold action" to rein in deficits, Canada's finance minister said on Friday.

In testimony prepared for a parliamentary committee, Flaherty admitted that Canada's second-quarter growth was also set to come in below expectations, but he also said Canada was on track to balance its budget by 2014-15.

"As we have emphasized repeatedly for some time now, we are in a period where the global economic recovery especially in the US and Europe is fragile and growth will be modest," he said.

"However, it is important to note that the global economy is in fact largely growing - albeit slowly."

It is rare for parliamentary committees to hear testimony of this nature during the summer break.

But Canada's opposition New Democrats called for the hearings as financial markets swooned during what is traditionally a quiet summer season partly on fears that the world was heading back into recession.

Bank of Canada Governor Mark Carney is scheduled to speak to the committee after Flaherty.

Helped by a robust financial sector, by tax cuts introduced before world economies began to slow and then by a package of government stimulus spending, Canada weathered the global economic crisis better than most of its trading partners.

Flaherty said that growth was slowing now.

"While Canada experienced greater-than-expected growth in the first quarter, that is expected to be balanced out by a softer-than-anticipated second quarter as witnessed in other G7 countries," he said.

But he gave no hint that the government would step up stimulus spending, and made no mention of any plans from the Group of Seven rich internationalized countries for coordination to reassure financial markets.

"We are also staying the course with our plan to make Canada a low-tax jurisdiction for both families and businesses," he said. "Our low-tax plan is working, and the world is increasingly noticing.

Copyright Reuters, 2011