Energy prices only lift to exports this year before decline in 2009, says EDC



    OTTAWA, July 24 /CNW Telbec/ - Canada's total exports are expected to
jump by 4.2 per cent in 2008 as a result of soaring energy prices, according
to a Global Export Forecast issued today by Export Development Canada (EDC).
EDC forecasts export earnings to decline by 1 per cent as key commodity prices
pull back in 2009.
    "Since our Spring Global Export Forecast, there hasn't been much good
news for Canadian exporters. Losses due to the U.S. sub-prime crisis and its
spill over effects into Canada continue to mount, the impact of soaring
commodity prices upon consumers continues to increase, and proof of slowing
global production is rampant," said Peter Hall, Vice-President and Chief
Economist for EDC. "The gain of 4 per cent in exports in 2008 is actually an
energy price story, but when all price effects are removed, Canadian exports
are actually on track to tumble by 4 per cent this year."
    EDC expects the Canadian dollar to trade near parity with the US dollar
during the summer period before pulling back by year-end, trading in the USD
0.94 to USD 0.97 range during the first half of 2009. The forecast for the
currency is largely based upon an expected decline in the price of oil through
2009. The outlook sees crude prices sinking below USD 100 per barrel by the
end of this year, and averaging USD 84 per barrel in 2009. Bolstered by higher
prices for natural gas, Canada's energy exports are expected to rise by almost
40 per cent this year, before falling 7 per cent in 2009.
    "While EDC recognizes that global supply and demand for crude is tight,
we sees signs that a large price correction is on the horizon", Mr. Hall
continued. "On the demand front, growth expectations are likely to moderate as
the global slowdown spreads and oil price subsidies in emerging markets are
scaled back. On the supply front, the Energy Information Administration is
already forecasting a doubling of OPEC surplus capacity, to 4 million barrels
per day in 2009, and non-OPEC supply gains of 1 million barrels per day."
    EDC's forecast noted that a significant portion of the recent spike in
oil prices is the result of speculative investors seeking safe haven from a
falling U.S. dollar. EDC's forecast also noted that the exchange rate between
the U.S. dollar and the Euro is more tightly linked to the price of oil now
than in the past. EDC believes that when the U.S. dollar stops falling against
the Euro, speculators will exit crude and prices will fall accordingly.
    On a sectoral basis, robust global demand for grains and high prices
should help buoy the agri-food and fertilizer sectors. Exports of industrial
commodities continue to benefit from soaring prices, but an expected
correction in 2009 should pull earnings down. Weakness continues to be
concentrated among forestry, automotive and consumer goods - areas that rely
heavily on the struggling U.S. market. The expected drop in the Canadian
dollar, however, will provide some relief in 2009.
    U.S. real Gross Domestic Product (GDP) grew only 1 per cent in the first
quarter of 2008, as consumption grew at its slowest rate since 2001 and
residential investment in each of the last two quarters posted the greatest
declines since 1981. Economic data suggest the potential for upside risk to
EDC's baseline growth assumption in the second quarter, but EDC sees little
evidence that the U.S. is ready to emerge from its economic slump. The U.S.
housing market is in the doldrums, and prices have further to fall. The U.S.
consumer remains saddled with mortgage debt, imports are slowing, and weakness
is expected to spread to the rest of the world. The forecast for overall U.S.
growth is 1.6 per cent in both 2008 and 2009, well below general market
estimates of potential growth.
    The outlook for developed markets is similar to EDC's Spring Global
Export Forecast. Japan continues to flirt with recession, and the growth
outlook for the Eurozone has softened. Taken together, GDP growth in developed
markets is forecast to slow from the 3 per cent rate of expansion between 2003
and 2007 to just 1.8 per cent through 2009.
    Emerging markets are expected to continue driving demand this year before
succumbing more fully to the global slowdown in 2009. Emerging market
prospects are unfolding roughly as expected. Gross Domestic Product growth is
slowing, inflationary pressures are growing and credit rationing is underway.
Central Banks are reluctantly raising interest rates to bring down surging
energy, food and other commodity prices at a time when demand is slumping. EDC
is projecting overall emerging market growth will slow to just under 7 per
cent this year and 6.4 per cent in 2009, with the outcomes varying across
markets.
    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 seven consecutive years.




For further information:

For further information: Media contact: Phil Taylor, Public Affairs,
Export Development Canada, (613) 598-2904


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