OTTAWA -- Finance Minister Jim Flaherty warned that Statistics Canada would report on Monday a "sharp" and "substantial" drop in fourth-quarter economic activity -- perhaps a contraction of over 4% based on the most bearish outlooks.

His warning, through a series of broadcast interviews Friday, suggests he is bracing Canadians for the worst next week, when GDP data is released. The U.S. reported similar data Friday, indicating that country’s economy shrank by a whopping 6.2% in the final three months of 2008.

The Bank of Canada had originally forecast a 2.3% fourth-quarter contraction. But private-sector economists have revised their estimates downward, calling for a drop ranging from 3.6% to 4.2%, based on among other things a big drop in December retail sales.

Mr. Flaherty would not divulge specifics on the fourth-quarter data, but indicated they would mirror the eye-popping U.S. results.

"We are going to see the figures for Canada on Monday, and we are going to see a substantial drop in economic activity -- a sharp drop in Canada, as we anticipated in the budget," the Minister said.

"I expect the numbers to continue to get worse for some time. They will get better, eventually. But in the meantime we have to get the stimulus dollars into the economy to help Canadians, help them get jobs and help [their] communities."

The day after the fourth-quarter data is released, the Bank of Canada is set to announce it latest interest rate decision -- and a widely-held expectation is that it will reduce its benchmark lending rate by another 50 basis points, to a record-low 0.50%. But, it is expected the central bank will signal it has finished cutting for the time being in the belief that fiscal stimuli and low interest rates will start to kick in the latter half of the year and lead to a growth rebound.

In his interviews, Mr. Flaherty also defended the government’s decision to set aside $3-billion in a fund that departments can tap in an effort to quickly implement certain fiscal stimuli, starting April 1. Opposition politicians, who have expressed concern that Ottawa may not get money out the door quick enough, argued the $3-billion in cash represents a "slush fund" with no oversight as to how its spent.

Mr. Flaherty said the fund is needed due to an "archaic" system in the Canadian Parliamentary system, in which it can take months for the government to get the authority from legislators to spend the money allocated in the budget.

"If we follow the normal course, none of this money would flow for months -- probably the summer months," he said. "What we need to do is get the money out the door … just as our G20 partners are doing and, hopefully, we will start to see the stimulus take effect later this year."