In a world of shifting political, environmental and economic climates, exporters are constantly facing new risks and opportunities. The Global Economic Outlook offers insight on these changes to help you make better trade and investment decisions.

Chapters

  • Global Economic Outlook
  • Global Markets
  • Working in North America
  • Commodities

Global Economic Outlook

Chapter 1 of 4

Economy poised for liftoff with a few bumps along the way


Launch day is pivotal for space programs. It has been years in the making. The science took decades to perfect. It depends on the entire history of several scientific disciplines. And it takes an army of specialists to ensure that launch day arrives, and that it succeeds.

These all must be working in concert, understanding the importance of each detailed and highly complex task, executing flawlessly. One slight hitch, another costly delay. One tiny flaw, potential catastrophe. The parallels with the global economy are not exact, but they’re close.

A rocket poised for launch is one of the best examples of potential energy. Does the economy have any of that? Many believe that the fuel is spent, that the best we can do is sputter along until we run out—that we’re pretty much tapped out, and our next recession is imminent. It’s interesting that many of the same people lament the global economy’s sub-standard post-recession performance and explain it away as a new normal. Meanwhile, there are large chunks of activity that, 10 years on, have still not recovered. Business and residential investment in the United States and EU economies is like that rocket on the launch pad: there’s lots of pent-up pressure there that could vault the developed world forward for several years, pulling emerging markets along for the ride. 

Why isn’t this happening? If it’s truly the case, wouldn’t consumers and businesses have done it already? Normally, yes. This time around, we were down for so long that it has been difficult to pull the switch—it’s sort of a “you first” world. We were just getting to that point in the “two-engine” economies when populism and politics got in the way. Weary of waiting for successive elected leaders to get it right, large chunks of the global population have given up on post-war institutions and the few that they see as benefitting from them. They are electing leaders that at least in word are willing to challenge the accepted norms and propose new and radical policies for the future.

The tangible moves are obvious: tearing up the Trans-Pacific Partnership (TPP); challenging the Canada-United States-Mexico Agreement (CUSMA); voting for Brexit; the U.S.-China tariff war; and less overt actions that take advantage of the melee. Mission Control is in disarray and investors are pulling back. That’s right, at the very moment business investment is poised to take the baton, there’s so much chaos among the engineers that those with the money are sitting on the sidelines. If business investment was hesitating before, it’s doing it now in spades.

We believe that there will be resolution on all major counts, and that this year will be a pivot-point in the global trade space. Why so upbeat? Precisely because the costs of impasse or escalation are simply too great, for all parties involved. There’s simply too much political motivation to get the program back on track and restart the countdown clock.

 

As such, EDC’s Spring 2019 Global Economic Outlook forecasts that after a temporary moderation in growth, the global economy will accelerate from 3.4% this year to 4% in 2020. This presumes the resolution of trade friction and the subsequent unleashing of business investment, which spurns job creation and a rebooting of residential investment. Developed markets will ramp up from 1.9% growth in 2019 to 2.2% next year, with the U.S. economy taking the lead. Emerging markets will follow on with 4.2% growth this year, which increases to 5.4% in 2020.

Despite this ramp-up, commodity prices are generally expected to see only modest growth. The temporary softening of growth this year has slowed the pace of interest rate hikes, which together with the commodity price outlook will ensure that the Canadian dollar stays below the US80-cent threshold. As such, Canada’s exports are forecasted to post back-to-back growth in spite of the challenges posed by specific trade-inhibiting policy actions. Demand conditions across the globe paint a positive near-term picture for exporters.

 

The bottom line? 

Chaotic developments on the trade front have made predictions in this space harder to do. Peel away the developments on the surface, and a brighter underlying picture appears. Let’s hope that launching the rocket remains the priority, and that global trade hits its true trajectory in the next two years.

GEO overview

Global Economic Indicators 2016 2017 2018 2019 (f) 2020 (f)
(GDP (% y/y)
World Total 3.3 3.7 3.7 3.2 4.0
Developed Markets 1.7 2.3 2.2 1.9 2.2
Canada 1.1 3.0 2.0 1.7 1.8
United States 1.6 2.2 2.9 2.9 3.0
Euro Area 1.9 2.5 1.8 1.5 1.9
  Germany 2.2 2.5 1.5 1.5 1.8
  France 1.1 2.3 1.5 1.5 1.7
United Kingdom 1.8 1.8 1.4 1.1 2.0
Japan 0.6 1.9 0.7 0.7 0.4
Emerging Markets 4.4 4.7 4.8 4.2 5.4
China 6.7 6.8 6.6 6.0 6.6
India 7.1 6.7 7.2 7.5 7.6
Brazil -3.3 1.1 1.2 2.2 2.7
Mexico 2.7 2.3 2.1 2.0 2.2
Russia -0.2 1.5 1.5 1.3 1.6
South Africa 0.6 1.3 0.6 1.3 1.8
Currencies
CAD/USD 0.75 0.77 0.77 0.75 0.78
Commodities
Crude Oil (WTI, US$/bbl) 43.22 50.91 64.98 56.08 62.82
Natural Gas (Henry Hub, $/mmbtu) 2.49 2.96 3.16 2.96 3.12
Copper (USD/MT, LME)          4,862          6,162          6,527           6,562 6739
Gold (USD/oz, LME)          1,248          1,257          1,269           1,295 1255
Others
US housing Starts (000s)          1,177          1,208          1,264           1,350 1485
Fed Funds Target Rate - Upper Limit (%) 0.51 1.10 1.90 2.58 3.26

Sources: Statistics Canada, Haver Analytics, EDC Economics. 2018 is actual data while 2019 and 2020 are forecast.

Emerging and developed markets outlook

Emerging and Developed Markets Outlook CAD bn 2018 2018 Share of Total Exports 2018 2019 (f) 2020 (f)
Emerging Markets
Total Services                          20.13 3.1% 5.5% 4% 4%
Total Goods                          65.34 9.9% 13.1% 4% 7%
Total Volumes                          61.89   10.1% 2% 6%
Developed Markets
Total Services                        100.38 15.3% 5.5% 4% 4%
Total Goods                        471.70 71.7% 6.5% 3% 3%
Total Volumes                          61.89   2.5% 2% 3%
Emerging and Developed Markets
Total Exports (Goods and Services)                        657.55 100% 6.9% 3% 3%

Sources: Statistics Canada, Haver Analytics, EDC Economics. 2018 is actual data while 2019 and 2020 are forecasted.

Continue reading the Global Economic Outlook

Busy intersection with flashing billboards in Japan.

Global Markets

Chapter 2 of 4

A country-by-country examination of economic trends, challenges and opportunities for growth.

Construction worker fastens steel pipes atop building.

Working in North America

Chapter 3 of 4

A look at key economic indicators in the U.S. and Canada, including GDP and housing starts.

Tug boat motors past a series of oil rigs at sunset.

Commodities

Chapter 4 of 4

Find out how commodities, like oil, natural gas, copper and gold are performing globally.