Canada Goes to Davos with a Little Less Swagger

As discussed numerous times in the past. Australia and Canada will have financial difficulties because of the hedge fund money that came into thise economies because of perceived demand from China that did not taken into account Chinas slow down. Aivars Lode

At the exclusive World Economic Forum in Davos, Switzerland, a year ago, Canadian Prime Minister Stephen Harper signaled that significant policy changes were ahead for Canada, from making energy imports to Asia a key priority to revamping old-age benefits. While touting Canada’s relative economic health, he also used the platform to criticize Europe and the U.S. for failing to address their fiscal woes.

That was last year.

The World Economic Forum’s (WEF) logo is displayed on a window inside the Congress Centre ahead of the WEF meeting in Davos this week.

Though some prominent Canadians are making the trip to Davos this week, Mr. Harper won’t be one of them. Some of the changes he signaled were indeed implemented in a federal budget introduced months after his Davos speech. But the economy and government finances aren’t on the same solid footing as last year, when the prime minister spoke confidently about the country’s prospects.

“All the big economic engines that helped pull Canada quickly out of the recession—consumer spending, housing, and government spending—are either tapped out, or in flat-out retrenchment,” said Douglas Porter, deputy chief economist at BMO Capital Markets.

Bank of Canada Governor Mark Carney, who is months away from taking over the Bank of England, is the only Canadian policy maker scheduled to speak at Davos, at a panel discussion on the global economic outlook. His presentation will come just days after the Bank of Canada releases its quarterly Monetary Policy Report. That snapshot of the economy is likely to include reduced growth projections. Canada’s gross domestic product grew at a tepid 0.6% annualized rate in the third quarter, compared with the 1% predicted by the Bank of Canada in October, and isn’t expected to have expanded more than 1.5% in the fourth quarter, according to private-sector economists. That would be well below the 2.5% the central bank projected.

Finance Minister Jim Flaherty will be one of four of Mr. Harper’s cabinet ministers travelling to Davos. Under Mr. Flaherty, the Canadian government’s books have looked better than most in the developed world since the financial crisis. But weaker commodity prices and global growth have cast some doubt over whether the Canadian government will reach its goal of a balanced budget in time for the next federal election, tentatively scheduled for late 2015. The government still says it’s do-able.

Some Canadian provincial premiers—Alberta’s Alison Redford and Quebec’s Pauline Marois–are also expected to attend Davos, according to local media reports. Representatives for Ms. Redford and Ms. Marois weren’t immediately available to comment. Both provinces are under fiscal pressure as growth in tax revenue slows. That’s especially true in oil-producing Alberta, where western Canadian crude trades at a steep discount to global benchmarks due to a lack of pipeline capacity.