November 10, 2004 WINNIPEG -- Manitoba exports are forecast to grow a modest 3 per cent next year, after rebounding by 16 per cent in 2004, according to a provincial export outlook from Export Development Canada (EDC). "Strength in Manitoba's agri-food and resource-based commodities will drive turnaround in growth this year," says EDC senior vice-president and chief economist Stephen Poloz. "Export growth will then moderate in 2005 as commodity prices pull back." The agri-food industry is projected to build on the 24 per cent rebound in sales this year with a more modest increase of 7 per cent in 2005. Strong global demand and added food processing capabilities are behind the solid performance in this sector. New BSE-related government aid packages are anticipated to increase volumes in processed meat, and will likely mitigate some of the downward pressure on domestic pricing from continued U.S. border constraints on cattle. The sector should also benefit from higher swine prices in the U.S. now that countervailing duties against Canadian hog producers have been dropped. However, the outlook is less favourable for Canadian wheat producers. While duties on durum have been lifted, tariffs on Canadian hard spring wheat remain. Wet and cold weather conditions over the summer and early fall will also pose a downside risk for crop yields going into 2005. Manitoba's machinery and equipment exports (M&E) are set to recover over the next two years with a solid increase of 7 per cent this year followed by 5 per cent in 2005. Higher commodity prices and the province's concentration in the sale of farming implements, which account for 20 per cent of M&E exports, will lead the upturn this year and next. Manitoba's metal exports, mainly nickel and zinc, should also experience growth as a result of higher commodity prices. Although, prices are likely to ease back in 2005, they will remain above average and should compensate for the strong CAD. In contrast, the outlook is less certain for the province's energy sector. Export sales are set to contract by 6 per cent in 2005 following a rise of 7 per cent this year. A three-year drought resulted in poor energy production last year and the beginning of this year. However, heavier precipitation and the restocking of Manitoba Hydro's watershed should help improve electricity generation going forward. Manitoba's aircraft parts were negatively impacted by uncertainties in global travel, and will depend heavily on a recovery in the commercial segment of the aerospace industry. However, pent-up demand from the U.S. this fall should see improved export sales for the province's specialty vehicle and bus manufacturers, pushing motor vehicle exports up by 6 per cent and 5 per cent in 2004 and 2005, respectively. In 2004, agri-food sales will be the largest export sector, accounting for an estimated 36 per cent or $3.9 billion of total sales. This is followed by industrial goods at 20 per cent or $2.2 billion, and energy and M&E at around 9 per cent, or $1 billion, each. Overall, Manitoba exports are expected to reach $10.6 billion in 2004, up 16 per cent over last year, and are expected to rise to $11 billion in 2005. Nationally, the economy is expected to grow by 3.2 per cent in 2005, roughly on par with 2004, and export sales should increase by 1 per cent in 2005, after rising by 9 per cent this year. A copy of EDC's Global Export Forecast is available on EDC's web site: http://www.edc.ca/docs/ereports/gef/EFindex_e.htm EDC provides trade finance and risk management services to Canadian exporters and investors in up to 200 markets. Founded in 1944, EDC is a Crown corporation that operates on commercial principles. - 30 - Information: Glen Nichols Public Affairs Tel.: (613) 598-2876 E-mail: glnichols@edc.ca
