OTTAWA (Canada) - CANADA expects to continue posting budget surpluses in the coming years, despite a slowing economy and the possibility the country is now in a recession, Finance Minister Jim Flaherty said on Thursday.

'The volatility we are seeing in the world economy is truly historic,' Mr Flaherty told parliamentarians, in an unusual fiscal update offered at a time of global economic uncertainty.

It is 'driving down our economic growth expectations' and 'economic projections are now much lower than at the time of our last budget', he said.

Private sector forecasters expect real gross domestic product growth of just 0.6 per cent this year and 0.3 per cent next.

The same forecasters are also 'widely expecting a technical recession', with negative growth in the fourth quarter of 2008 and the first quarter of 2009.

Regardless, the federal government is predicting its 12th consecutive budgetary surplus this fiscal year ending March 31, 2009, estimated at 0.8 billion Canadian dollars, down from 9.6 billion dollars in the same period last year.

The following two years, the surplus is projected to plummet to 0.1 billion dollars, before crawling back up to 1.1 billion dollars in 2011-2012, and to 4.2 billion dollars in 2012-2013.

'In the weeks ahead, we will determine the extent to which we will inject additional stimulus to our economy, joining the efforts of our international partners,' said Mr Flaherty.

But he warned, 'Any additional actions to support the economy will have an impact on the bottom-line numbers in our next budget. These actions, or a further deterioration in global economic conditions, could result in a deficit'.

There was no stimulus package announced in the fiscal update, but Canada pledged at a recent meeting in Washington to join other G20 nations in attempting to stimulate the global economy with bold spending at home.

Instead, Mr Flaherty pointed to past tax cuts that have helped stimulate the economy to the tune of two percent of Canada's gross domestic product - almost twice those of the United States or Britain.

'The stimulus is so far working,' he told reporters. 'If the situation worsens, we'd like to do more, likely on the spending side.'

In the interim, the government will curtail spending, Mr Flaherty announced, including eliminating a 1.95-dollar-per-vote taxpayer subsidy for politicians and political parties (effective on April 1, 2009).

Meanwhile, the government set public sector wage increases at 2.3 per cent for 2007-2008, and 1.5 per cent for the following three years, while introducing legislation to suspend workers' right to strike through to 2010-2011.

The government also hopes to find operational savings in an ongoing departmental spending review, he said. -- AFP