(OTTAWA) April 17, 2006 The U.S. slowdown is trickling though the world's economies and continuing to pressure the Canadian exporter, according to the semi-annual Global Export Forecast released today by Export Development Canada (EDC). EDC does not expect the global slowdown to be severe or that it will drag on.
"The flurry of mixed data has economists and markets shifting rapidly between upside and downside outlooks," said Stephen Poloz, Senior Vice-President of Corporate Affairs and Chief Economist. "We believe that the global economy is at an inflection point where growth will moderate through 2008, down from its recent pace. The wildcard is the continuing possibility of a retrenchment by the US consumer, a vital player in determining global growth."
EDC is forecasting 4.5 per cent global economic growth in 2007 and 4.6 per cent growth in 2008, down from 5.1 per cent in 2006. Economic growth in the US is expected to slow to 2.1 per cent in 2007 before increasing to 2.8 in 2008, down from 3.3 per cent in 2006. In Canada, economic growth was 2.8 per cent in 2006, and is forecast to slow to 2.3 per cent in 2007 before picking up the pace to 2.9 per cent in 2008. Canadian export growth will mirror global performance, as EDC expects a decline in exports of 1 per cent in 2007 before rebounding slightly to grow by 1 per cent in 2008.
"While global growth has slowed, it still will be quite healthy through 2008. Ironically, this strength brings stress to Canadian export performance as the persistent strength in the energy and mining sectors continues to mask weakness in other key sectors of the Canadian economy," continued Mr. Poloz. "That being said, Canadian exporters are responding with increased productivity and more diversification in sales and supply, away from the US and towards faster growing emerging markets."
Globally, the economic growth cycle has peaked and monetary policy is generally moving toward a neutral stance. EDC expects a decline in the Canadian dollar to between 83 and 84 cents U.S. by the end of 2007 before easing further to between 82 to 83 cents U.S by the end of 2008. The easing of the Canadian dollar reflects EDC's projected decline in the price of oil to USD 55 per barrel in 2007 and a further drop to USD 50 in 2008.
Canadian exports to emerging markets grew by 13 per cent in 2006 to reach a record CAD 40 billion. Growth leaders in 2006 were Russia (53.6 per cent), India (47.9 per cent), Central and Eastern Europe (28.8 per cent), Mexico (25.2 per cent) and Africa (23.9 per cent). EDC expects export growth to emerging markets to continue in 2007, with an increase of 7 per cent, before slowing to a still-healthy 4 per cent in 2008. Provincially, EDC expects mixed performance across the country. The highest forecast rates of export growth in 2007 and 2008 will be Saskatchewan (9 and 2 per cent), PEI (2 and 4 per cent) and Manitoba (3 and 1 per cent), reflecting a strong national agri-food sector. The lowest rates of export growth are forecast for New Brunswick (-6 and 0 percent), and also for Ontario (-3 and 0 per cent) and Quebec (-2 and 0 per cent) where manufacturing activity is most concentrated.
Export sectors that are forecast to see continued growth in 2007 and 2008 are fertilizers (20 and 14 per cent), agri-food (9 and 4 per cent), machinery and equipment (3 and 5 per cent), and telecom (2 and 2 per cent). Certain sectors, such as machinery, telecom, aerospace components and other high-tech goods are working the new trading environment to their advantage by utilizing more imported inputs as well as other cost-saving strategies. This grouping is expected to perform well through the next few years.
Export sectors that are forecast to experience declines in 2007 and 2008 will be consumer goods (-6 and -4 per cent), autos (-6 and 1 per cent) and forestry (-4 and 1 per cent), as these beleaguered sectors continue to face challenging conditions. A softer pricing environment will also dampen export receipts for energy (-2 and 1 per cent) and metals (0 and -4 per cent).
"Trade is increasingly unfettered by geography. As the relevance of borders and distance decreases, the newfound proximity between economies increases their impact upon one another," added Mr. Poloz. "This year, the U.S. slowdown is impacting the rest of the world. The good news is that the slowdown should not be severe and is not anticipated to drag on."
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 at : http://www.edc.ca/gef.
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 has been named one of Canada's Top 100 Employers for six consecutive years.
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Media contact:
Phil Taylor Public Affairs Export Development Canada (613) 598-2904 ptaylor@edc.ca
