Exporter situation to worsen before improving

    OTTAWA, Oct. 30 /CNW Telbec/ - The strong Canadian dollar and slower
consumer spending in the U.S. and globally will make conditions even more
challenging for many Canadian exporters in 2008, according to the quarterly
Global Export Forecast released today by Export Development Canada (EDC).
    "2008 will be the third year in a row of essentially flat export
shipments," said Stephen Poloz, Senior Vice-President of Corporate Affairs and
Chief Economist. "But even that misses an important story, which is that many
Canadian exporters have been trying to maintain export sales even as the
rising dollar has squeezed their profit margins."
    The value of total export sales is forecast to grow by 1.5 per cent in
2008, after price-induced growth of 3.7 per cent in 2007. World economic
growth will slow further to 4.5 per cent after 4.9 per cent in 2007 and
5.4 per cent in 2006, as U.S. weakness spills over into both major and
emerging markets.
    U.S. consumers are coming under increased stress as the housing recession
spreads to the broader economy. The financial market turbulence of mid-2007,
itself a symptom of weakness in the U.S. housing sector, is combining with the
lower U.S. dollar to slow consumer spending in Europe and Japan.
    Despite their significant growth in recent years, emerging markets remain
highly dependent on exports of consumer goods to the major economies. While
the impact of slower world demand will not be immediate, it will become
increasingly evident through 2008. Global market turbulence will be felt to
some degree in all emerging markets, but the riskiest markets will be more
acutely affected as creditors recalibrate risks and adjust their exposures.
    Canadian economic numbers have remained strong thus far and strong global
demand for commodities, resource-based intermediate goods and agri-food
products has boosted prices and the value of Canadian exports in 2007. As the
world economy loses momentum, commodity prices will retreat, and this will
lead to a softening of the Canadian dollar through 2008. Although the outlook
for oil prices, and therefore the Canadian dollar, remains highly uncertain,
it is expected that lower oil prices and rising global risks will cause a
general strengthening of the U.S. dollar, and a decline of the Canadian dollar
to less than 90 cents by the end of 2008.
    The outlook remains good for some of Canada's export sectors. Export
growth will hold up well in such sectors as agri-food, fertilizers, energy,
aerospace and machinery in 2008. In contrast, sectors such as consumer goods,
ores, metals, chemicals, plastics, rail equipment, telecom equipment and
automotive products are forecast to be weak. Growing geographic
diversification in Canadian exports is expected to continue throughout the
forecast period. Exports to the developed world are forecast to rise by less
than 1 per cent in 2008. Export growth in emerging markets is projected to
reach 11 per cent, down from 24 per cent in 2007.
    In 2007 there has been significant variation in export growth among the
provinces. Those provinces with a large share of energy, mining or agri-food
in their export mix are performing well above the national average. Those
provinces relying more heavily on manufactured goods, particularly autos,
telecom equipment and consumer goods, have experienced much slower export
growth over the past year.
    Provincial export growth will again vary widely in 2008. Saskatchewan
will lead the way, with a 12 per cent increase. Decent growth rates of 7 per
cent are projected in Manitoba, 6 per cent in New Brunswick, and 5 per cent in
Newfoundland and Labrador and Prince Edward Island. An increase of 4 per cent
is expected in Alberta and 3 per cent in Nova Scotia. British Columbia will
grow by a modest 1.7 per cent. Ontario's exports are expected to decline by
1 per cent, and a 1.4 per cent decline is forecast for Quebec.
    "Preparing for slowdown, and predicting its duration is never easy,"
continued Mr. Poloz. "But there are good fundamental reasons to believe that
the global economy will avoid recession. On balance, the world enjoys a far
sounder structural platform than in the past, putting it in a much stronger
position to rebound from a weak period and then revive in 2009. The big
unknown is whether the U.S. consumer will stabilize. If not, Canadian
exporters could face noticeably weaker conditions than we are forecasting."
    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 downside risks for which exporters should be prepared. The
Forecast is available on EDC's website 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 6,400 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 seven consecutive years.

For further information:

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

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