Export sector a hostage of global economy

Canada’s export sector will continue to struggle through 2009 and well into 2010, as the global economy shakes off the recession, according to Export Development Canada.

Total export value for 2009 will be off 21% compared to 2008, and the EDC predicts only 6.6% growth in 2010.

“The good news is that global commerce is actually working off the excesses that had built up in recent years,” said Peter Hall, vice-president and chief economist at EDC. “Unfortunately, the pile was so high that we still have a way to go before balance is restored in the latter part of next year.”

The decline in exports has been two-fold; not only has the physical quantity of goods exported fallen, but the price of many key commodities have fallen as well.

The EDC has revised its global economic forecast lower once again, to a contraction of 1.7% in 2009, with 2.7% growth expected in 2010, slightly stronger than the 2.3% growth predicted in the spring forecast.

Net value of energy, fertilizers and base metal exports are seen declining by 38%. Forestry, which suffered even during rosier economic times, will see a decline of 14% for the year. Manufactured goods will not see any relief either, as the auto sector is expected to post a decline of 22%.

Hall says the Canadian dollar will provide some protection to exporters, as it hovers between 83 and 85 cents U.S. over the coming 18 months. “But true recovery will not come until 2011,” he says.

While the Canadian dollar floats freely on the global currency markets, it faces challenges posed by countries which manipulate their currency values. The G8 meeting in L’Aquila, Italy issued a statement today calling on all countries to avoid the temptation of currency devaluation as a means of gaining an export advantage.

“We will refrain from competitive devaluations of our currencies and promote a stable and well functioning international monetary system,” the leaders said in a draft joint declaration.

(07/09/09)