Deficit hits record $55.6B, Flaherty says

Canada's federal deficit for the 2009-10 fiscal yearis a record $55.6 billion, Finance Minister Jim Flaherty announced Tuesday.

That figure isalmost $2 billion higher than the $53.8-billion deficit projected in the federal budget last March, andwas largely prompted by a one-time transfer of $5.6 billion to Ontario and British Columbia to help them make the transition to the harmonized sales tax.

But thanks to more robust growth earlier this year, the deficit for the current 2010-11 fiscal year will likely come in $3.7 billion lower than the $49.2-billion figure projected earlier, Flaherty told a business luncheon in Mississauga, Ont.

The finance minister said the country'sbooks will continue to improve, with a small deficit of$1.7 billion now forecast by201415 and a surplus of$2.6 billion by the following year.

Flaherty said the economy remained the government's "No. 1priority."His speech contained no new spendingor tax announcements.Current stimulus measures are scheduled to wind down next March.

GDP growth slowing

Flaherty met last week with more than a dozen private-sector economists. He said their consensus has Canada's GDP growth slowing to 1.8 per cent in the third quarter of this year.

"They also highlighted that the near-term global economic outlook remains uncertain, with the balance of risks tilted to the downside," he said, adding thatthe strength of the U.S. recovery remains a potential trouble spot forCanada.

Canadais the only G7 country to have recovered most ofits economic activity since the recession began, Flaherty said.

"As a result of Canada's solid economic performance over the recovery to date, nearly 423,000 jobs have been created in Canada since July 2009, more than were lost as a result of the global recession," he told his audience.