TORONTO, April 28 /CNW Telbec/ - Canada's exports and the world economy
will continue to decline until the latter half of 2010, when Export
Development Canada (EDC) forecasts that the global economy will find its feet
and the recovery will begin to kick in.
"A general sequence of events, what EDC is calling the five waves of
weakening, is underway and it gives light to the possible timing of a
recovery," said Peter Hall, EDC's Chief Economist.
"Working through the five waves is all about the economy getting back to
Mr. Hall made his comments in a speech to the Toronto Board of Trade
where he presented his Global Export Forecast, entitled "Restoring Balance".
The five waves of weakening began with the collapse of the U.S. housing
market in the middle of 2006, Mr. Hall said.
The second wave occurred when the housing market crash spilled into
financial markets, manifesting itself in the fall of 2008 in the turmoil that
pushed them to the brink.
The third wave was the successive sharp drop in global demand, which EDC
notes is still very much underway.
The fourth wave is occurring now as employment losses are currently
mounting, with significant layoff announcements at large multinationals
becoming a daily event. When using past recessions as a guide, EDC believes
that job losses in most economies have only just begun and expects much more
as the year wears on.
Wave five has yet to manifest itself. "What remains to be seen is the
impact of these significant job losses on an already-stressed financial
sector, which is the fifth wave of weakening. Default rates are almost sure to
rise through 2009, and the way the system copes with the fallout will likely,
in a big way, determine the timing of recovery," said Mr. Hall.
Mr. Hall added that "although wave five will be a lot to deal with, the
global economy will get a large well-timed boost as governments' stimulus
measures are felt. Specifically, the impact of current interest rate
reductions will be substantial, and fiscal packages announced around the
world, when spent, will be massive when measured against global GDP."
"Given the timing of the announcements, the policy measures are likely to
reach peak effectiveness at the same time as wave five reaches the beach, just
in time to provide a substantial offset. How the outlook unfolds after that
will depend, to a great degree, on the overall impact on confidence, which at
present is extremely low."
Putting it all together, EDC is forecasting a 1.3 per cent decline in
2009 and 2.3 per cent increase in 2010 in global GDP. "From the current
vantage point, it is difficult to imagine that the global economy will begin
to recover much before the latter half of 2010," said Mr. Hall.
As a trading nation, Canada is caught up in the global downdraft. The
generalized retrenchment of credit markets in the U.S., and the ensuing
collapse of consumer demand and commodity prices are the greatest impact upon
Canada's export performance.
EDC is forecasting Canada's exports will decline by 22 per cent in 2009
before staging a comparatively modest 7.4 per cent increase in 2010. In this
context, EDC forecasts that Canada will see a 2 per cent drop in GDP this year
and 1.7 per cent growth in 2010.
EDC's forecast noted that those domestic sectors that benefited the most
from the surge in global commodity prices will also be the ones that suffer
most from the current downturn in prices, largely erasing the divergence that
had emerged in recent years between resource-based exporters and exporters of
As the Canadian dollar is largely a petrocurrency that is also influenced
by commodity prices, EDC is forecasting that the Canadian dollar will remain
lower, averaging 80 cents in 2009 and rising slightly to 81 cents in 2010.
EDC is forecasting the price of crude to fall from an average USD100/brl
in 2008 to USD 47/brl in 2009 before rising to an expected average USD 55/brl
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 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 more than 8,300
Canadian companies and their global customers in up to 200 markets worldwide
each year. EDC is financially self-sustaining, a recognized leader in
financial reporting and economic analysis, and has been recognized as one of
Canada's Top 100 Employers for eight consecutive years.
For further information:
For further information: Media: Phil Taylor, Export Development Canada,
(613) 598-2904, Blackberry: email@example.com