"Yes, we'll balance and it won't be close, we're in good shape. We could have a larger surplus than we anticipated but we will have a surplus."
- Jim Flaherty, Canada's Finance Minister
On January 1, 2013 the USD/CAD was traded around 0.9927 and one year after the pair was hovering above 1.07. A significant depreciation of the Canadian Dollar as well as the start of the tapering by the Federal Reserve, are suggesting Canada and the nation's exporters in particular, will benefit from a weaker currency. On Monday Finance Minister Jim Flaherty said the economy is expected to log a bigger budget surplus than it was expected in the 2015-16 fiscal year. In November, the government made a projection of a $3.7 billion surplus, on the back of additional spending cuts, asset sales and hopes bureaucrats will not spend all the cash consigned to them. This year, however, the country is likely to post a $17.9 billion shortfall, s $5.5 gap in 2014 and swing further in the following year.
While cheaper currency is definitely good for the economy, Flaherty also stressed out Canadians could face higher borrowing costs this year, as the U.S. central bank slows its stimulus programme. Trading overnight index swaps, however, is suggesting the Bank of Canada will not start raising rates this year. Additionally, the latest poll from Bloomberg showed the economy will pick up to 2.3% this year, accelerating from a 1.7% growth in 2014, while the nation's largest trading partner, the United States, will post a 2.6% growth in 2014. The main risks for the Canadian economy are elevated housing prices as well as high consumer debts.
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