Canadian exporters are facing a clash of increased global opportunities with impending geo-political risks that are throwing their international plans and strategies into confusion, according to Export Development Canada’s (EDC) latest semi-annual Global Export Forecast (GEF).
EDC reports that while geo-political instability will cause some businesses to hesitate growing their trade business or making foreign investments, overall world growth will press on, continuing to gain momentum in the short term despite the uncertainty.
“This is a story of risk, opportunity, and what ifs,” said Peter Hall, EDC Senior Vice President and Chief Economist. “Even as the architecture of international commerce is being questioned in the political space, we are convinced that the business end of world economy will continue to gain steam in the short term.”
EDC is projecting world growth to rise from 3.5 per cent this year to 3.8 in 2018 – an upswing in momentum as growth has hovered around 3.5 per cent during the last five years. However, rising protectionism, namely in the European Union and the United States, is putting this global growth story at risk.
“Is this the beginning of the end for globalization? That’s highly unlikely – the cost is massive, and everyone gets a bill in the mail. Remember, a wrecking ball doesn’t only swing one way – it swings back,” added Mr. Hall. “The message that EDC has for Canadian companies is to stay in the game and win the contracts that others have been frightened away from.”
Emerging markets will be big beneficiaries of this increased global growth and indicators point to new possibilities for Canadian companies.
“Tightening in the key U.S. and EU markets translates into increased activity on the export front in the emerging world,” said Mr. Hall. “We’re seeing that businesses are seeking out opportunities and yield beyond the U.S. and Europe, which is probably the best news that emerging markets have had in years.”
In Canada, higher commodity prices will fuel a 6 per cent increase in the country’s overall export performance for 2017. In addition to a recovery in prices, new and accelerating global growth will further boost Canada’s international sales by 5 per cent in 2018. This is a noteworthy increase over 2016 when exports stalled, thanks to a sharp decline in the energy sector that was intensified by the Fort McMurray wild fires. However, that’s not the situation this year. The energy sector rebound is leading Canada’s export rebound, with the industry expected to notch an 18 per cent increase. Growth continues in 2018 with an additional 7 per cent increase.
Other success stories include an 11 per cent increase in ores and metals, and notable increases in machinery and equipment, chemicals and plastics, forestry, and aerospace. Rising prices are responsible for the surge in the ores and metals as well as the chemicals and plastics sectors. However, the risk for those industries in the future is addressing current capacity constraints.
Services, increasingly a key driver in the Canadian export story, will also post back-to-back 5 per cent growth in the next two years.
Mr. Hall will provide an in-depth view of Canada’s exporting story during his month-long, cross-country Let’s Talk Exports tour. The initiative highlights export prospects for Canadian companies around the globe in addition to providing insights into the health of the global economy, how it will impact Canadian exporters, and what EDC can do to support companies ready for growth. For more information, visit EDC’s Global Export Forecast to register.
