By Leo Ryan, AJOT
Following an unprecedented decline in 2009, Canada’s exports will stage a moderate but sustained recovery in 2010, reflecting the anticipated gradual bounce back in the post-recession world economy.
Such was a forecast contained in an in-depth analysis of world export trends recently released by Export Development Canada (EDC), a federal export credit agency that provides financing and risk management services to Canadian exporters and investors in up to 200 markets worldwide. The EDC facilitates about C$80 billion in transactions annually.
The Canadian economy depends heavily on foreign trade, which represents over 33% of its GDP. Commodities account for the biggest share, followed by manufactured goods and services.
In a document entitled The Race to Recovery, the EDC stresses that while Canada may have fared better during the recession than other industrialized states, Canadian exports plummeted an estimated 23% in 2009. In 2008, total Canadian exports had risen 7.4% to C$526 billion.
In line with the global outlook, Canadian exports are expected by the EDC to post 6% growth in 2010 – “a welcome increase but one that leaves activity in all industries well below 2008 levels.”
Actual GDP growth in Canada is seen reaching 1.9% next year in the wake of a 2009 decline of about 2.3%.
Asked to comment on these numbers, Bob Ballantyne, president of the Canadian Industrial Transportation Association (CITA), whose 130 members account for an annual transport bill of some $6 billion, suggested that the operative term is “cautiously optimistic for 2010.”
“Our exporting members are confident they will hold their own or run slightly above current market shares,” Ballantyne told AJOT.
He noted that “it hurts us when so many major export commodities such as pulp and paper are priced in US dollars. On the other hand, the strong Canadian dollar favors imports of modern machinery, which improves productivity in some industries.”
Impact of high-flying Canadian dollar
In the second week of December, the Canadian dollar was hovering in the 97 cents US range, whereas, in the view of the EDC, “global fundamentals suggest it should be closer to 85 cents US. Persistent strength of the currency would be damaging to Canadian exports next year, and hamper Canada’s readiness for global recovery.”
“Commodity price increases will favor producers of key primary products, but weak demand and price suppression will crimp growth in the remaining export categories,” comments Peter Hall, the EDC’s vice-president and chief economist.
Looking to the immediate future, Hall said that Canada had technology and expertise to win contracts in the “hot” Green infrastructure projects in non-traditional emerging markets. “These are the markets of the future and present, and present a great diversification opportunity for Canadian exporters.”
Hall recalled that Canadian sales in these markets were soaring in the late years of the boom (just prior to the 2008-2009 recession) – so diversification has already begun. “There’s no time like the present to launch into these markets ahead of the coming recovery.”
Stuart Bergman, the EDC’s director of economic analysis and forecasting, was quite candid in declaring that energy exports (one quarter of total exports in 2008) will be “a primary drag on total exports this year, as the technological advances in the natural gas market result in a shift in the fundamental demand/supply balance, and US demand for crude oil remains extremely weak. Sector exports will grow next year, though the recovery will largely be price driven.”
The EDC report says that the dramatic fall of in Canadian exports of ores and metals in 2009 reflected the collapse in developed market industrial production as well as the bursting of the commodity price bubble.
“Very strong demand from Asia for base metals mitigated the carnage, and growth from this region will increasingly influence Canadian export values,” the report said, ad
Canada’s export outlook shining brighter
By: Leo Ryan | Dec 10 2009 at 07:00 PM | Channel(s): International Trade
By Leo Ryan, AJOT