Canada says deficit larger than expected

TORONTO - Canada's finance minister said Monday the federal deficit will be substantially more than projected because the economic slowdown has been worse than expected.

Finance Minster Jim Flaherty predicted in January a deficit in Canada for the first time in more than a decade, and said Monday that the financial shortfall for 2009-2010 will be higher that the orginal forecast of 34 billion Canadian dollars ($30 billion).

Flaherty said lower tax revenues and increased spending on unemployment insurance are two of the major reasons.

Canada's central bank has projected that then country's gross domestic product fell 7.3 percent in the first three months of 2009, dropping at the steepest pace in decades.

Canada has avoided bank bailouts and none of its major financial institutions have failed. However, Canada and its economically hard-hit neighbor, the United States, have the largest trading relationship in the world and the financial crisis and the global sell-off of commodities have hit Canada hard since last fall.

The government unveiled a $32 billion economic stimulus package in January.

But Alberta's once-booming oil sands sector has cooled as every major company has scrapped or delayed some expansion plans.

Canada lost a record 273,300 jobs in the first three months of the year.

Copyright 2009 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.