Canadian Prime Minister Stephen Harper said the nation's economy may have entered a recession, joining the rest of the members of the Group of Seven industrialized nations.

 

``Recent private sector forecasts suggest the strong possibility of a technical recession at the end of this year and the beginning of next,'' Harper said today at a news conference in Lima, where he was attending the Asia-Pacific Economic Cooperation forum. ``I am surprised at this. I am further surprised by deflationary pressure that we're seeing around world.''

 

Harper said if necessary Canada would run a ``short-term'' deficit to stimulate the economy. He repeated that he will seek to avoid a series of deficits that would outlast a period of sluggish growth, or what he calls a ``structural'' deficit.

 

Earlier today, Finance Minister Jim Flaherty, in an interview with the CTV television network, joined Bank of Canada Governor Mark Carney in predicting two quarters of shrinking output that most economists define as a recession. The world's eighth-largest economy is weighed down by slumping shipments of automobiles to the U.S., and lower prices for exported commodities such as oil and wheat.

 

`Risky' Plan

 

Harper said Canada wasn't in a recession before winning his re-election bid in October by arguing, in part, the rival Liberals had a ``risky'' plan to tax pollution that would trigger a recession.

 

``We have to be pragmatic and not ideological when we find ourselves in situations that are not usual,'' he said today. When asked by a reporter, he did not provide further details about what such a stimulus package would look like.

 

Flaherty, 58, will present an update of his budget projections to lawmakers on Nov. 27 in Ottawa. He told CTV today that Canada will record a budget surplus in the fiscal year ending March 31, and he may try and restrain the growth of compensation for civil servants at a time when private companies are announcing layoffs.

 

Next year's budget won't ``abandon'' already-announced tax cuts, and may have other types of ``stimulus'' to boost growth, Flaherty told CTV.

 

The federal government will run a deficit of C$3.9 billion ($3 billion) in the year that ends March 31, 2010, the budget office said in projections published Nov. 20, and a C$1.4 billion deficit in 2010-11. This fiscal year there will be a surplus of C$4 billion. The last budget deficit in Canada was in 1996-97.