Canada chems welcome stimulus budget, urge more action

28 January 2009 15:15  [Source: ICIS news]

TORONTO (ICIS news)--Canada’s chemicals producers have broadly welcomed the government’s federal economic stimulus budget but also warned that “significant work" remained to address the industry’s challenges, an industry association said on Wednesday.

“We welcome this budget as just the first step towards addressing some of the major shortcomings of Canadian economic policy and that further work will be done by the federal government to deal with business conditions in Canada,” said Richard Paton, president of the Ottawa-based Canadian Chemical Producers Association (CCPA).

Prime Minister Stephen Harper’s minority Conservative government on Tuesday put forward a budget with a C$85bn ($69bn) deficit over five years – Canada’s first deficit after over a decade of budget surpluses.

The budget, which needs support from opposition parties to pass, includes C$12bn in infrastructure spending and C$20bn in tax reductions and tax breaks, among other measures.

“The budget deals as well as could be expected with the liquidity issue, and takes the necessary steps to stimulate the economy in areas like infrastructure,” said Paton.

“However, we all still have a long way to go to address competitiveness issues that are essential to attracting investment and maintaining jobs in Canada,” he said.

Paton criticised in particular the budget's extension of provisions for accelerated capital cost allowance for new manufacturing and processing equipment by only two years, instead of five.

“We don’t understand the government’s reluctance to implement it [the extension] for five years and we request a review of this decision before the end of the additional two-year period,” he said.

Chemicals producers and other investors needed a five-year planning and investment horizon to make decisions, he said.

Harper last month suspended Parliament after opposition parties rejected his earlier economic plan and threatened to topple his minority government.

Two opposition parties, the leftist NDP and the Bloc Quebecois, already said they would not support the budget.

The opposition Liberals, who hold the balance of power, are due to say later on Wednesday if they will support the government's budget.

Canada's economy is projected to contract through mid-2009, with real GDP dropping by 1.2% this year on an annual average basis, according to projections by the Bank of Canada last week.

However, as policy actions would begin to take hold in Canada and globally, and with the support of a weaker Canadian dollar, real GDP is expected to rebound in 2010 when it is estimated to grow by 3.8%, the bank said.

($1 = C$1.23)

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