Export agency forecasts slower recovery

Mon Oct 31, 2011 10:28am EDT
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By David Ljunggren

OTTAWA (Reuters) - The weak world economy and natural disasters mean Canada's exports will not return to pre-recession levels until mid-2012, about half a year later than expected, the country's export credit agency said on Monday.

Export Development Canada (EDC) also cut its export growth forecast for 2011 to 11 percent from the 12 percent it forecast in May. It kept its forecast for 2012 at 7 percent.

Canada is enormously dependent on exports, which accounted for around 30 percent of gross domestic product in 2010. Just under 75 percent of all exports go to the United States.

The sector has been hit by the sluggish U.S. economy, a strong Canadian dollar, tough foreign competition, unrest in North Africa, and natural disasters. Last week, the Bank of Canada said exports would continue to be a source of weakness.

EDC chief economist Peter Hall took a more upbeat line, saying exports have been remarkably resilient.

"The recession wiped out one-quarter of our trade, but by mid-2012, we will have recovered all of the momentum lost in the global downturn," he said. In May, he forecast exports would return to pre-crisis levels by the end of this year.

Despite the challenges, Hall said he was encouraged by the fact that consumers were paying down debt, housing markets were slowly healing and orders were growing.

He also said Canadian exporters had "found very creative ways of living with an appreciating currency" such as increasing diversification, moving some production offshore and cutting costs.   Continued...