A new forecast by Export Development Canada (EDC) is focusing on the substantial, trade-driven growth that is currently being obscured within the popular ‘new normal’ narrative.
“Years of sluggish growth have convinced us that weakness is here to stay, especially in light of the significant public spending cuts around the globe. This ‘new normal’ thinking is masking a very good business story,” said Peter Hall, Chief Economist, EDC.
“The public fiscal drag is costing the world’s advanced economies 1.2% of GDP this year and next, a huge hit to growth, but it also means that there is a faster-growing side of the economy that’s keeping world output increasing. That growth is coming from the private sector in the U.S. and fast-paced emerging markets, and that’s the space that Canadian exporters play in.”
EDC forecasts that the Canadian economy will grow by 2% in 2012 and a slightly better 2.2% in 2013. Canada’s trade with the rest of the world is the key driver of the outlook.
“It may not look great on the surface, but behind what many are calling “new normal” growth is a faster-paced global economy, full of opportunity,” said Mr. Hall. “So far, things are looking good for Canadian trade, and export momentum is outstanding.”
All told, Canadian exports are projected to rise 7.1% this year and 7.3% in 2013, following 10.8% growth in 2011. EDC believes that all of Canada’s regions and the bulk of its broad industry sectors will participate in this good-news story.
EDC’s forecast notes that Canadian merchandise exports are already up 5.3% over last year’s levels, and any further growth this year will move the figure even higher. An important part of EDC’s forecast is the analysis of the American economy, Canada’s largest trading partner. The forecast suggests that U.S. economic momentum will spur growth ahead for Canadian exporters in a wide sweep of industries.
EDC predicts that the U.S. economy will rise 3% next year, even as fiscal contraction takes 1.3% away from GDP growth. The forecast implies an underlying rate of private-sector, business-driven growth that looks much more like a true recovery.
Canadian exporters will also benefit from continued diversification of sales into fast-growing emerging markets. Emerging market export growth will be broadly-based across global regions, but the hot spot will be Emerging Asia with 13% growth this year and 16.6 % growth in 2013.
“We see a real, sustainable recovery beginning toward the close of 2012,” said Mr. Hall. “Canada stands to benefit for a number of reasons, but our greatest challenge may well be finding the capacity to accommodate the growth coming our way.”
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.