OTTAWA, November 6, 2006 Slowing global economic growth will increase the pressure on Canadian exporters in the coming months, according to the semi-annual Global Export Forecast released today by Export Development Canada (EDC). EDC expects that pressures will begin to abate in the second half of 2007.
The U.S. economy is at the centre of weaker global performance. Fallout from the burst U.S. housing market bubble is spreading rapidly to other economies. The acceleration of globalization in the past decade has increased global business integration, speeding up the spread of the U.S. slowdown.
"Economic bubbles burst so quickly that the effect is hard to predict", said Stephen Poloz, Senior Vice-President of Corporate Affairs and Chief Economist. "The world economy is more resilient today than in the past, and is better able to weather weaker conditions. But it would be a mistake to underestimate the potential impact of the recent slowing." U.S. growth is forecast to slow to 2.2 per cent in 2007, down by over one per cent from this year and the weakest performance since 2001. EDC is forecasting 4 per cent global economic growth in 2007, also down considerably from the 2006 pace. In Canada, economic growth is forecast to slow from 2.8 per cent in 2006 to 2.4 per cent in 2007.
Slower global growth will lower commodity prices from peak levels, but prices will remain relatively high. The Canadian dollar will follow this pattern, easing to roughly 82-84 cents U.S. by the end of 2007. At the same time, rising risks will lead to wider corporate and emerging market bond spreads after the extraordinary narrowing of the past few years. Higher spreads will commence in the economies and corporate sectors most stressed by recent developments.
"Although 2007 will see the slowest global growth in 4 years, the pace is reasonably healthy," continued Mr. Poloz. "Even so, growth will remain unbalanced. Emerging markets will continue to outpace the major economies by a wide margin. And manufacturers will continue to face much greater hurdles than the energy sector."
Unbalanced global growth will be reflected in near-term Canadian performance. While total exports of goods and services experience a mild 1 per cent contraction, sectoral performance will vary considerably. Exports to developed economies will slide by 2 per cent, while shipments to emerging markets increase by 7 per cent. The energy and metals sectors, both enjoying double-digit expansions this year, will each see mild, price-induced declines in 2007 that belie rising volumes of activity. Steeper declines will be seen in the manufacturing sector, where auto sector exports are forecast to drop by 6 per cent and both the consumer goods and forestry sectors face a 7 per cent retreat. The softening Canadian dollar, largely a result of slower demand, will provide a modest reprieve to manufacturers.
Imbalance will also characterize provincial export growth. Like this year, energy exports will have significant influence on provincial performance in 2007, with growth in Newfoundland and Labrador leading the way at 11 per cent, followed by a 6 per cent gain in Nova Scotia. In 2007, export growth will be most strained in Ontario, British Columbia, and New Brunswick, as exports in each province are forecast to fall by 3 per cent.The Global Export Forecast addresses the latest global export conditions including perspectives on interest rates, exchange rates, as well as export strategies to help Canadian companies minimize risk. It also analyzes a range of downside risks for which exporters should be prepared.
EDC's semi-annual Global Export Forecast is available on EDC's web site athttp://www.edc.ca/docs/ereports/gef/EFindex_e.htm
EDC is Canada's export credit agency, offering innovative commercial solutions to help Canadian exporters and investors expand their international business. EDC's knowledge and partnerships are used by 7,000 Canadian companies and their global customers in up to 200 markets worldwide each year. EDC is financially self-sustaining and is a recognized leader in financial reporting, economic analysis and human resource management.
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Media contact: Phil TaylorPublic AffairsExport Development Canada (613) 291-1276ptaylor@edc.ca
