Thank you, Mr. Chairman.
First, let me apologize for not having a written submission for members of the committee. However, I am going to make a few comments in the time I have. If members wish to find out more background on what I'm saying, they can go to a blog that I co-author with Peter DeVries of 3D Policy. Also, we have a regular opinion piece every Tuesday on iPolitics that deals with issues of public policy and public finance.
I know your deliberations are very important now. The government has a surplus on the horizon—and I'll come back to that in a minute—so there are lots of expectations being created externally in the public, and no doubt internally in the government, about what to do with that surplus. I have been in government long enough to know that managing a surplus, in my experience, is probably more difficult than managing a deficit, given the demands that everybody puts on the government. I would like to address a number of cautions that I would propose for the committee to think about in going ahead in terms of how to use that surplus.
I say that because I have years of experience. I was a deputy minister of finance during the good years of the 1990s and the bad years of the 1980s, so I've lived through both fiscal crises and the management of surpluses.
There are a number of cautions I want to focus on. No doubt many of you have also been reading about them and been seeing them on television. They have to do with the state of the global economy first.
The IMF, the International Monetary Fund, at its recent meeting in early October came out with some pretty sobering conclusions and observations that I think we all need to take account of. In its report, which was just released two weeks ago, the IMF reduced, once again, its forecast for the global economy to 3.3%. That's down 0.4% from last April. China makes up one-third of that. If you exclude China, they're suggesting the global economy will grow about 2.5%.
I want to put that in perspective. In the second half of the 1990s, when the Liberal government at that time had lots of surpluses, the global economy was growing at between 5% to 5.5%. The prospect going forward for the next decade, at least, is for a very moderate growth in the global economy.
The reason is pretty simple. The euro area is about to enter its third recession since 2008. It's going to take years and years for the euro area and the EU to recover into a sustainable economic growth entity. The Chinese economy is dramatically slowing. Russia is about to enter another recession. Certainly if oil prices fall to $70 or stay below $80, the Russian economy is going to be in serious difficulty. Finally, the developing economies are stalling. The global economy is not doing well.
I think it's worth my quoting, if you will, from the IMF. The IMF is saying that growth will be mediocre and stagnant going forward:
Downside risks have increased since the spring. Short-term risks include a worsening of geopolitical tensions and a reversal of recent risk spread and volatility compression in financial markets. Medium-term risks include stagnation and low potential growth in advanced economies and a decline in potential growth in emerging markets.
For Canada, the IMF has said that growth will be 2.3% for 2014 and 2.4% in 2015, but this was before oil prices started their dramatic decline. We all know what the implication of that could be for Alberta and Saskatchewan, which have been driving the economy for the past number of years.