(TORONTO) – October 28, 2008 – Canadian export growth will decline further through 2009 with a recovery unlikely before mid 2010, according to a Global Export Forecast released today by Export Development Canada (EDC).
"A quick rebound to the global slowdown is clearly not on. The considerable excesses of the boom years, including lending, housing and commodities, will take considerable time to work off," said Peter Hall, Chief Economist at EDC. "The global financial story that is dominating headlines everywhere began with the US housing market, which will remain underwater given the millions of excess units on the market. When that inventory is worked through, a recovery may have the chance to develop, but we don't expect that to happen until 2010, at the earliest."
Canada's exports are being hit hard by this situation. When large commodity price movements are removed, the real volume of exports is down an estimated 5 per cent in 2008. However, price gains were significant enough during the year that the dollar value of exports will actually rise by 1 per cent. Lower commodity prices are expected to remove this effect in 2009, when exports are projected to post no growth. Exporters will benefit from a lower Canadian dollar, which is forecast to stabilize in the mid-80 cent range through 2009.
Canadian overall economic performance will remain lackluster, consistent with the weaker performance of advanced economies in general. Canadian growth will rise by a slim 0.9 per cent in 2008 and a projected 1.4 per cent in 2009. The world economy is expected to slow from a pace of 3.8 per cent in 2008 to a near-recessionary 3.3 per cent in 2009. Weakness will also be felt in emerging markets as they slow from 6.8 per cent in 2008 to just 6.0 per cent in 2009, a long way from the 7.6 per cent pace of 2004-2007.
'Normally growth this weak would further pummel Canadian exports, but good timing and key industry developments will keep overall activity close to 2008 levels,' continued Mr. Hall. In spite of large price declines, volume shipments of energy products will see moderate increases, which will help stabilize the overall export picture. EDC expects crude oil to average USD 75/bbl for 2009, marking a 26 per cent decline from this year's projected average of USD 102/bbl as speculators beat a hasty retreat. Solid global demand for agrifood products and fertilizer will keep these important Canadian sectors growing. The aerospace sector is forecast to increase shipments as Canada's product mix is in high demand. New product lines will keep the beleaguered auto sector afloat through 2009.
Gross Domestic Product (GDP) growth for the U.S. will slow to 1.7 per cent in 2008 and decelerate further to 1.0 per cent in 2009. While decline may have been averted in the first half of 2008, a struggling consumer, an apprehensive investment climate and floundering manufacturing activity will mean falling U.S. imports for a second consecutive year in 2009. With the fortunes of Canadian exporters inextricably linked to the U.S. market, EDC expects the value of Canadian exports to the U.S. to fall for a fourth consecutive year.
Faced with inflation pressures, high exchange and interest rates earlier this year, correcting housing markets, and weak consumer and business confidence, the Eurozone's GDP growth continues to falter. EDC's downwardly revised outlook forecasts growth of only 1.0 per cent in 2009 after 1.5 per cent growth in 2008. EDC predicts that by late 2009, as inflation moderates and interest rates continue to fall, growth will begin to recover. However, if other markets like Russia, China or India stumble by more than expected, the slowdown could require more time to play out.
EDC's semi-annual 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 risks for which exporters should be prepared. The Forecast is available on EDC's website at www.edc.ca.
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 nearly 7,000 Canadian companies and their global customers in up to 200 markets worldwide each year. EDC is financially self-sustaining, is a recognized leader in financial reporting and economic analysis, and has been named one of Canada's Top 100 Employers for eight consecutive years.
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Media contacts:
Phil Taylor
Export Development Canada
Tel: (613) 598 2904
BlackBerry: ptaylor@edc.ca
