Ottawa Business Journal

Exports are expected to grow by a wan two per cent next year, with growth anticipated to be flat until at least mid-2009, according to Export Development Canada.

The agency's quarterly Global Export Forecast said the continued strength of the Canadian dollar, the economic troubles down south and a decline in commodity prices from their current sky-high levels will hit Canadian exporters harder this year, with total exports forecasted to fall by two per cent in 2008.

Losses are expected across most export sectors this year, except for key commodities associated with the tighter global food and energy markets, with growth kicking back up slightly in 2009, the report said.

"Like a hard-fought chess game, the Canadian economy has made very good moves in adverse conditions over the past two years and stayed out of trouble. But suddenly we're in check," said EDC's deputy chief economist Peter Hall in a statement. "While it took longer than expected for the U.S. housing crash to spread, there is little doubt that we are in the middle of a significant slowdown. What remains uncertain among exporters is the depth and length of the downturn."

The report said the Canadian dollar is expected to stay at around parity until the second half of this year despite ample monetary stimulus from the Bank of Canada, since U.S. short-term interest rates are forecasted to continue dropping. By the end of 2008, the Canadian dollar will trade at between 86 U.S. cents and 90 U.S. cents.

Export declines will occur in 9 of the 13 broad industry categories, the report said, with the exception of the ever-soaring energy and agriculture sectors.

The strength of these two categories will boost growth in Saskatchewan, Manitoba, Alberta and New Brunswick, but in U.S.-sensitive central Canada, significant declines are expected this year, the report noted.

Global export growth is also expected to slow down, with the traditional trade powerhouses of the European Union, Japan and the United Kingdom anticipated to weaken because of recessionary fears and tight policy positions by the European Central Bank. This softening is expected to lower global growth to 3.8 per cent in 2008 and 2009, since the three markets account for nearly half of global gross domestic product.

Meanwhile, the emerging markets are expecting an average growth rate of 6.8 per cent this year, down 0.8 percentage points from 2007, and growth is anticipated to decelerate further in 2009, to 6.4 per cent.

However, the news is not all bad, as the downturn in the emerging markets will not be as drastic as in previous years, the report said.

"Four years of strong global demand, surging commodity prices and elevated liquidity have allowed many countries to lower and improve their public debt burdens, strengthen government balances, and accumulate significant foreign exchange reserves," the report noted. "They have also improved policy credibility and implemented productivity-enhancing reforms."