Trade-driven growth story obscured by 'new normal' mantra: EDC forecast

Apr 19, 2012, 13:08 ET from Export Development Canada

OTTAWA, April 19, 2012 /PRNewswire/ - A new forecast by Export Development Canada (EDC) is focusing on the substantial, trade-driven growth that is currently being obscured within the popular 'new normal' narrative.

"Years of sluggish growth have convinced us that weakness is here to stay, especially in light of the significant public spending cuts around the globe. This 'new normal' thinking is masking a very good business story," said Peter Hall, Chief Economist, EDC.

"The public fiscal drag is costing the world's advanced economies 1.2 per cent of GDP this year and next, a huge hit to growth, but it also means that there is a faster-growing side of the economy that's keeping world output increasing. That growth is coming from the private sector in the U.S. and fast-paced emerging markets, and that's the space that Canadian exporters play in."

EDC forecasts that the Canadian economy will grow by 2 per cent in 2012 and a slightly better 2.2 per cent in 2013. Canada's trade with the rest of the world is the key driver of the outlook.

"It may not look great on the surface, but behind what many are calling "new normal" growth is a faster-paced global economy, full of opportunity," said Mr. Hall.  "So far, things are looking good for Canadian trade, and export momentum is outstanding."

All told, Canadian exports are projected to rise 7.1 per cent this year and 7.3 per cent in 2013, following 10.8 per cent growth in 2011. EDC believes that all of Canada's regions and the bulk of its broad industry sectors will participate in this good-news story.

EDC's forecast notes that Canadian merchandise exports are already up 5.3 per cent over last year's levels, and any further growth this year will move the figure even higher. An important part of EDC's forecast is the analysis of the American economy, Canada's largest trading partner. The forecast suggests that U.S. economic momentum will spur growth ahead for Canadian exporters in a wide sweep of industries.

EDC predicts that the U.S. economy will rise 3 per cent next year, even as fiscal contraction takes 1.3 per cent away from GDP growth. The forecast implies an underlying rate of private-sector, business-driven growth that looks much more like a true recovery.

Canadian exporters will also benefit from continued diversification of sales into fast-growing emerging markets. Emerging market export growth will be broadly-based across global regions, but the hot spot will be Emerging Asia with 13 per cent growth this year and 16.6 per cent growth in 2013.

"We see a real, sustainable recovery beginning toward the close of 2012," said Mr. Hall. "Canada stands to benefit for a number of reasons, but our greatest challenge may well be finding the capacity to accommodate the growth coming our way."

EDC's semi-annual Global Export Forecast addresses the latest global export conditions including perspectives on interest rates, exchange rates as well as export strategies to help Canadian companies minimize risk. It also analyzes a range of risks for which exporters should be prepared. The forecast is available on EDC's website at:

EDC is Canada's export credit agency, offering innovative commercial solutions to help Canadian exporters and investors expand their international business. EDC's knowledge and partnerships are used by more than 7,700 Canadian companies and their global customers in up to 200 markets worldwide each year. EDC is financially self-sustaining and a recognized leader in financial reporting and economic analysis.

SOURCE Export Development Canada