OTTAWA — Finance Minister Jim Flaherty says a little cooling of Canada's economy won't drastically alter the Harper government's next budget.

The Canadian economy contracted slightly in July -- for the first time since August 2009 -- but Flaherty said Monday he doesn't expect the numbers to have a significant bearing on next spring's budget.

"I think we're on track on our budget assumptions with respect to the economy," Flaherty told reporters following a private meeting with top economists.

Statistics Canada reported the country's gross domestic product, the broadest measure of the economy's strength, fell 0.1 per cent in July.

Some economists have tempered their expectations. The chief economist at CIBC warned that Canada's GDP could fall well below government forecasts next year as a combination of negative factors pinch the recovery.

Avery Shenfeld says a softer Canadian housing market, the end of federal stimulus packages and guarded spending by U.S. consumers will be a drag on Canada's economy.

CIBC projects real Canadian gross domestic product, an inflation-adjusted measure of the economy, will grow by 1.9 per cent in 2011, compared with a 3.2 per cent pace assumed in the 2010 federal budget last March.

But Flaherty said expectations for the economy need to be dialled down as the world struggles to its feet after a major downturn.

"We're in a different world today," he said.

"This is not a time of booming economic growth. It's a time of modest growth and there needs to be some adjustment of expectations.

"We're not going to see the boom times that we saw before in the shorter term. We're in a term of high uncertainty."

But the finance minister said he sees a silver lining in the "significant growth" of developing countries, such as China and India. He added that he's encouraged, too, by the lesser growth of the U.S. economy.

He reiterated the Tories will turn off the stimulus taps next spring as the government aims to balance its books by 2015.

Flaherty also said there are no plans to further tighten mortgage rules. But he added his department keeps tabs on consumer debt and he isn't ruling out further tightening down the road.

"We continue to watch. If it's necessary to tighten the rules further, we will tighten them further," he said.

"Our concern is always ensuring that the housing market does not overheat and, in particular, that the mortgage market does not overheat. We watch affordability, we watch to ensure that marginal investments are guarded against."

In the March budget, Flaherty estimated this year's deficit would reach close to $50 billion.

However, a strong first half of the year has some analysts predicting the government is well on its way to beating that projection -- although the economy has cooled in recent months.

"We have seen a significant slowdown in private-sector employment growth in Canada in the past three months. A very significant slowdown," said Brian Bethune of IHS Global Insight.

"The uncertainty is playing out right now."