Why the future is bright for Canadian exporters: EDC report

When looking at current economic calls and headlines for Canada, it’s tough to come up with a clear forecast. Confusion around global issues such as NAFTA negotiations and U.S.-China tensions are one reason, while domestic hiccups related to BoC policy and the high indebtedness of Canadians are another.

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But, even as pessimists have called for possible recessions and corrections, there’s some good news, says Export Development Canada (EDC) in its latest biannual global outlook report. In a Thursday release, EDC said, “Exports will rise 4% this year and 5% in 2019, leveraging higher growth in traditional markets and diversifying further into the emerging world.”

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It also calls for “increased investment and growth in key markets around the globe that will translate into opportunities for Canadian exporters.”

One reason for the export credit agency’s optimism is it expects corporations around the globe to invest in their workforces, facilities and technologies. Why? Industry reaching full capacity can be “a precursor to increased investment” rather than to a recession, the release says.

For Canada, ECD does concede that “rising interest rates coupled with high household debt will put the brakes on consumer spending,” but it expects that will be offset by “growth in government spending, net exports and business investments.”

For both 2018 and 2019, EDC forecasts “modest growth” of around 2% for Canada.

In its fall 2017 export forecast, EDC was similarly optimistic. At that time, it said, “2017 was a remarkable year for Canadian exporters,” adding that export growth would taper off but remain positive at 4% for this year.

What about NAFTA?

Despite tensions around the trade deal, EDC says its economists “do not see a major impact on either the U.S. or Canadian economies at this point.” It adds, “All parties are working hard to come to a resolution that satisfies each country.”

Mexico may have a tougher time, however, due to political uncertainty and tight fiscal and monetary policies. As such, EDC has “downgraded its growth forecast for Mexico slightly, predicting growth of 2.2% in 2018, before jumping to 2.7% in 2019.”

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Other global highlights from EDC

• The U.S. economy is expected to rise by more than 3%, both this year and next. Increased protectionism and a possible trade war are key risk factors but pent-up demand and new tax legislation could jolt domestic demand.
• The revival of the Eurozone and the potential for business investment will see economies in the region collectively rise by 2.5% this year and 2.1% in 2019.
• While tension between China and the U.S. could impact economic performance, China is expected to average 6.5% growth this year and 6.4% next year.
• India’s outlook continues to be one of the brightest, with 7.5% growth in 2018 and an increase to 7.6% in 2019. Hikes in public salaries, combined with a 2018 budget focused on boosting the consumer, will support strong GDP growth, says EDC.

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