Government cuts growth outlook, says not gloomy

The Canadian government cut its estimate of 2011 real economic growth on Tuesday to 2.2 percent from 2.9 percent, based on private-sector forecasts, but said the economic future was not doom and gloom.

Ottawa sees the economy growing at 2.1 percent next year, compared with the 2.8 percent that the government estimated in its June budget, Finance Minister Jim Flaherty told reporters.

Flaherty said that despite the lower forecast, Canada's economic performance is still the envy of much of the world, but he again expressed concern about Europe's ability to solve its debt crisis. European leaders are holding a special summit on the crisis on Wednesday.

This (the forecast) is not doom and gloom. There is continuing to be a forecast of modest growth in Canada, he said.

But tomorrow there could be quite a gloomy day if the Europeans ... cannot come up with a rescue plan that will satisfy the world and particularly investors who are looking at this with great trepidation, he said.

The private-sector forecasts will be used in the Finance Department's fall fiscal update, which Flaherty said would be released within a few weeks.

The median forecast in a Reuters poll of analysts this month was for 2.2 percent real growth this year and 2.4 percent next year, while the Bank of Canada on Tuesday pegged 2011 growth at 2.1 percent and 2012 growth at 1.9 percent.