Despite recent economic challenges, Canada’s economy is demonstrating resilience and is poised to reap the benefits of an improvement in the global outlook in the second half of the year, Finance Minister John Manley said Wednesday.

“At the midpoint of 2003, we face a challenging economic environment,” Manley said in a speech at a breakfast hosted by the Economic Club of Toronto. “And it is important to remember that the problems challenging us are global in nature, although their impact is local.”

In his remarks, Manley said that the full impact on the Canadian economy of the severe acute respiratory syndrome (SARS) outbreak in Toronto and the appearance of bovine spongiform encephalopathy (BSE) has yet to be completely determined. However, these factors, combined with the weaker-than-expected U.S. economy and the recent rapid increase in the value of the Canadian dollar, are expected to reduce Canada’s economic growth this year.

As s a result, private sector economic forecasters surveyed by the Department of Finance have lowered their 2003 growth forecast to 2.2%. At the same time, forecasters expect growth to pick up in the second half of this year and into next year. As a result, they are expecting growth in 2004 to rise to 3%.

In the area of fiscal management, Manley stated that Canada continues to outperform its G-7 counterparts. Final figures for the 2002-03 fiscal year, which will be released this fall, are expected to confirm a sixth consecutive surplus.

“Once the books are closed, I expect the surplus for 2002-03 will be about equal to the $3 billion contingency reserve that was incorporated in the 2003 budget,” Manley said. This surplus will reduce federal debt, bringing the total amount of federal debt reduction to more than $50 billion since the country’s books were balanced in 1997-98.

“We expect to balance our books again this year and next,” Manley said.