- Canada's Trade Confidence Index is at 112, well above neutral indicating that Canadian companies are optimistic about opportunities to grow their business internationally.
- One in four Canadian companies surveyed expect Asia to be the best opportunity for business growth in the near term.
VANCOUVER, Sept. 16, 2014 /CNW/ - The latest HSBC Global Connections Trade Forecast - which focusses on trends in Canada's energy sector -- advises that global economic activity is expected to strengthen over the coming year, and increased momentum in the US and China should lift Canada's exports in the short run. In the longer term, Canada's ability to access fast-growing emerging markets is dependent on an increase in energy infrastructure capacity.
World energy demand and prices are expected to rise in 2015, and Canada's production continues to outpace domestic demand creating ample potential for Canada to ramp up its energy exports beyond its current key US market.
Linda Seymour, Executive Vice President and Head of Commercial Banking, HSBC Bank Canada said: "Oil will contribute nearly 50% to the increase in exports over the next two years, however in 2017-20, its share is forecast to drop below 20%. Canadian firms need to expand and diversify their energy export strategies if Canada is to remain a key player in the global energy market. Rail will be the key driver until 2020 after which research shows that planned pipeline projects have the possibility to address this challenge. If Canada can build the necessary infrastructure, it will be well placed to become a global exporter of oil, rather than one overwhelmingly focused on the US."
The US currently receives 97% of Canada's energy exports. Oil exports to the US are expected to grow by 7.4% in 2014-16, moderating to just above 5% further out. In contrast, petroleum exports to China will grow by 53.7% in 2014-16 and 10-14% further out. As a result, China's 0.2% share of Canada's fuel exports in 2013 is forecast to rise to 0.9% in 2020 and to 2.5% in 2040. Europe will also see stronger growth of energy imports from Canada.
Short term outlook
Canada's GDP growth is forecast to accelerate modestly from 2.0% to 2.1% in 2014, with the rebalancing taking longer to unfold than previously anticipated. Growth in consumer spending is forecast to decelerate from 2.4% to 2.2% in 2014 as households continue to deleverage. A rebound in investment in the second half won't be enough to counteract the 3.9% annualized decline in Q1, implying little growth contribution from investment this year.
The fastest-growing markets for Canadian exports in 2014-16 are expected to be Mexico, Korea, and China, and the fastest growing source markets for Canada's imports over the same period will be Mexico, Turkey, and the UK.
HSBC Trade Confidence Index (TCI)
Canada's TCI has declined slightly to 112 from 115 six months ago, trailing the global TCI average of 116. However, it remains well above the neutral benchmark of 100 indicating that the outlook for trade continues to improve although at a slower pace than previously.
The US remains strategically important for Canada's trade position, identified as the primary trade partner by 76% of survey respondents. Asia, and particularly China, are next in importance, with 18% and 12%, respectively.
Survey respondents expect better trade opportunities with Asian markets in the near future. One quarter of Canadian firms surveyed saying that Asia will be the best opportunity for business growth over the next 6 months, compared to 42% of respondents globally. Of the Canadian firms surveyed, 60% cited fluctuating exchange rate conditions as the top barrier to export and import business, and costs of essential services such as shipping, logistics and storage were a primary barrier for 44% of survey respondents.
Added Seymour: "There are numerous options for Canadian companies looking to overcome barriers to trade with China. Another recent HSBC survey shows that a small but growing number of Canadian companies are choosing the Chinese renminbi (RMB) as their trade settlement currency -- citing convenience, minimized FX risk, and requests from trading counterparties as the main drivers of usage. These findings are supported by global research that shows that an increasing number of Chinese companies are choosing to settle trade in RMB with around a quarter of Chinese survey respondents citing it as their most-used currency."
Long term outlook
The recent weakening of Canada's world export share has led firms to begin diversifying their trade routes toward Mexico and broader Asia. By 2017, China will take the lead as the fastest-growing market for Canadian exports. By 2017, imports from India, Turkey, and China will show the strongest growth.
At the sector level, oil is forecast to be the main driver of exports in 2014-20. Thereafter investment in pipelines and LNG facilities have the potential to substantially increase energy exports from Canada. Transport equipment and industrial machinery will also be important contributors to the growth in Canada's exports.
HSBC predicts that from 2016, international business growth will increase at significant levels year-on-year as both developed and developing markets come back to the world stage. This will account for increased trade worth trillions of dollars each year, as businesses capitalise on the rise of the emerging market consumer and developing markets stabilise their productivity levels for the future.
Over the longer term, the HSBC Trade Forecast anticipates global merchandise trade will more than triple between 2014 and 2030.
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For a copy of the Global Connections Trade Forecast report and for further information, log onto http://www.globalconnections.hsbc.com/. An infographic which portrays key findings from the latest trade forecast is also available for download upon request, and via the CNW website.
HSBC's Trade Forecast encompasses trade data for 25 countries and territories key to world trade.
Notes to Editors:
About the HSBC Trade Forecast - Modelled by Oxford Economics
Oxford Economics has tailored a unique service for HSBC which forecasts bilateral trade for total exports/imports of goods, based on HSBC's own analysis and forecasts of the world economy to generate a full bilateral set of trade flows for total imports and exports of goods, and balances between 180 pairs of countries.
Oxford Economics employs a global modelling framework that ensures full consistency between all economies, in part driven by trade linkages. The forecasts take into account factors such as the rate of demand growth in the destination market and the exporter's competitiveness. Exports, imports and trade balances are identified, with both historical estimates and forecasts for the periods 2014-16, 2017-20 and 2021-30. Sectors are classified according to the UN's Standard International Trade Classifications according to the UN's Standard International Trade Classifications (SITC) and grouped into 30 sector headings. More information about the sector modeling can be found on http://www.globalconnections.hsbc.com/
HSBC Trade Confidence Index
The HSBC Trade Confidence Index is conducted by TNS on behalf of HSBC in a total of 23 markets, and is the largest trade confidence survey globally. The current survey comprises six-month views of 5,800 exporters, importers and traders from small and mid-market enterprises on: trade volumes, risk to suppliers, need and access to trade finance, impact of exchange rates and regulation. The fieldwork for the current survey was conducted between November - December 2013 and gauges sentiment and expectations on trade activity and business growth in the next six months.
HSBC Commercial Banking
For nearly 150 years we have been where the growth is, connecting customers to opportunities. Today, HSBC Commercial Banking serves businesses ranging from small enterprises to large multinationals in almost 60 developed and faster-growing markets around the world. Whether it is working capital, trade finance or payments and cash management solutions, we provide the tools and expertise that businesses need to thrive. With a network covering three quarters of global commerce, we make HSBC the world's leading international trade and business bank. For more information see www.hsbc.com/1/2/business-and-commercial
About HSBC Bank Canada
HSBC Bank Canada, a subsidiary of HSBC Holdings plc, is the leading international bank in Canada. The HSBC Group serves customers worldwide from over 6,200 offices in 74 countries and territories in Europe, Asia, North and Latin America, and the Middle East and North Africa. With assets of US$2,754bn at 30 June 2014, HSBC is one of the world's largest banking and financial services organizations.
Image with caption: "Infographic: September 2014 HSBC Global Connections Trade Forecast (CNW Group/HSBC Bank Canada)". Image available at: http://photos.newswire.ca/images/download/20140916_C9145_PHOTO_EN_42790.jpg
SOURCE: HSBC Bank Canada
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