Canadian exports help trim large current account gap

Thu Feb 28, 2013 11:00am EST
 
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By Louise Egan

OTTAWA (Reuters) - Canada's current account deficit narrowed in the fourth quarter of 2012 as the country exported more goods to the United States, but the gap remained near record levels and analysts maintained their glum outlook for Canadian economic growth and trade.

The current account deficit for the quarter totaled C$17.3 billion ($16.9 billion), Statistics Canada said on Thursday. That was slightly bigger than the C$17 billion forecast by analysts in a Reuters poll, and smaller than the revised C$18.04 billion gap in the third quarter.

But the shortfall remained well above year-earlier levels and uncomfortably close to the record current account deficit of C$19.4 billion posted in the third quarter of 2010.

"Today's report reaffirms our expectation that net exports will provide a modest positive contribution to what is expected to be a mediocre GDP (gross domestic product for the fourth quarter)," Mazen Issa, economist at TD Securities, wrote in a note to clients.

"This does not reflect an improving external sector however, as the slight boost from net exports is expected to stem from a greater decline in real imports compared to the decline in real exports."

Statscan will report fourth-quarter GDP on Friday, and the consensus forecast is for 0.6 percent annualized growth.

Canada's GDP and employment have long recovered the losses of the 2008-09 recession but exports have yet to return to pre-crisis levels, battered by weak U.S. demand and the strong Canadian dollar.

Uncertainty in Canada's top trade partner and a currency seen by many as overvalued suggest the current account deficit, which now stands at nearly 4 percent of GDP, is unlikely to shrink dramatically any time soon, economists argue.   Continued...

 
Buildings are seen in the financial district in Toronto, January 28, 2013. REUTERS/Mark Blinch