Canada's economy could slide into a mild recession because of this month's terrorism attacks in the United States, Bank of Canada governor David Dodge said Friday. 
But because there is so much uncertainty about what's going to happen in the next few months, he said it's impossible to predict with any confidence beyond the New Year. 
"Right now, it is difficult to look too far ahead in terms of the economic implications for Canada of last week's events," according to Dodge. 
"Nevertheless, economic growth in the third quarter will likely be close to zero or slightly negative, and we will continue to feel the adverse effects into the fourth quarter." 
Many economists define a recession as two or more consecutive quarters (six months) of negative real Gross Domestic Product (GDP). Real GDP is a broad measure of economic output, including workers' incomes and companies' profits, that has been adjusted for inflation. 
Dodge told reporters it's "certainly possible" Canada could end up in this boat, but he cautioned that there's no way to know the extent of the drop in economic activity. 
Earlier in the day, the Conference Board of Canada released a report that also predicted the economy will stall, but it downplayed the chances of a "full-scale recession." 
The board said real gross domestic product (GDP) would probably fall to virtually zero in the third and fourth quarters of this year. 
"Although the damage was substantial, it is safe to say that the destruction and disruption can be managed successfully and will not be enough to drive either the United States or Canada into a full-scale recession," according to the report. 
"The terrorist attack should result in a Canadian economy that now demonstrates virtually zero growth in the last half of 2001, although a negative quarter will most probably be avoided, and thus even a mild recession is not in the cards," the Conference Board said. 
Industries expected to suffer most from the terrorist attacks include aviation, tourism, and general exports. 
Federal Finance Minister Paul Martin said Thursday that he's not certain how much Canada's contribution to the fight against terrorism will cost. But for the first time in years, he's not ruling out running a deficit again. 
The conference board thinks real GDP in the United States will drop initially, but could turn up slightly by the end of this year. More time, and statistics, are needed for an in-depth analysis, economists warned. 
In addition to the incalculable cost of lost lives, the damage to New York City's financial district is already estimated at $20 billion. Lost economic output in the United States will probably add up to about $25 billion in September alone, according to analysts. 
"The entire (U.S.) economy came to a virtual standstill," Canada's Conference Board said. Planes were grounded, many consumers reduced spending, and stock markets were closed. 
Although it's possible that increased spending by the Pentagon may give the U.S. economy a boost, analysts have said that too much of a jolt might cause chronic inflation. 
