Canadian businesses can expect to see 3 per cent growth in exports of goods and services next year following a downbeat 2016 that saw exports stall, according to a new global export forecast released by Export Development Canada (EDC).
Canada’s lackluster performance this year and next masks the success stories. In 2016, the automotive and consumer goods sectors did very well, each seeing a second successive year of double-digit growth. However, this good news story was completely offset by sharp declines in energy exports, fertilizer sales, and shipments of metals.
EDC believes that the modest rebound facing Canadian exporters in 2017 will be led by a sharp recovery in the energy sector, as prices return from significant lows. Decent gains will also be seen in the aerospace, fertilizers and consumer goods industries. Exports of services will also be impressive, rising by 5 per cent in 2017 (after 4 per cent in 2016). EDC’s forecast notes that the uptick in the services sector will be driven by tourism, financial, and technology services.
“The uneven growth we are seeing this year will continue into 2016,” said Peter Hall, Chief Economist, EDC. “Primary industries are still reacting to the plunge in commodity prices, but with prices now up from early-year lows, 2017 shipments should do better. Robust U.S. demand and a subdued Canadian dollar will continue to boost key manufactured products.”
The greatest threat to the export outlook is the alarming rise in anti-trade sentiment. The Brexit vote puts at risk the world’s largest trading bloc, while the U.S. election has revealed widespread discontent with America’s current trade architecture.
“After years of slow growth, consumers and businesses around the globe are frustrated,” said Mr. Hall. “You can’t blame them. Seven years seems like an eternity when you’re waiting for your first real job, or your next one. But lashing out at globalization is really an attack on one of the key economic remedies.”
“With a populous tide turning against global trade, businesses are hesitant to make major moves, opting instead to ’wait and see’," added Mr. Hall. "Despite the potential for growing demand that we see in key global markets, they could be shying away from some of the best opportunities in years.”
The ongoing progress in the US economy coupled with the weak Canadian dollar will spur Canada’s export performance in 2017. For instance, aerospace, fertilizers, and consumer goods will all post solid growth next year, all fueled by the recovery of US demand.
Another bright spot for Canada is that energy-rich provinces can expect a 12 per cent rebound in energy export growth in 2017. This increase will be supported by ongoing recovery in oil prices and an increase in volumes compared with 2016, when production was negatively affected by the Alberta wildfires.
Globally, EDC forecasts that global GDP growth will be 3 per cent this year and 3.4 per cent in 2017. GDP growth in Canada’s primary trading partner, the US, will rise from 1.5 per cent in 2016 to 2.4 per cent in 2017. Among key emerging markets, China is decelerating but still expected to register over 6 per cent growth. India, however, will be leading the pack with expected growth of 7.4 per cent in 2017.
“The downward revision from the last forecast is directly related to anti-trade developments,” said Mr. Hall. “But the good news is that for now, fundamental drivers of the world’s top economies are strong. If they end up boosting near-term activity, now may be the best time for shrewd Canadian companies to take advantage of opportunities where their foreign competitors are abandoning them.”
For the full report, visit EDC’s Global Export Forecast: Fall 2016.
