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OTTAWA (Reuters) - Canada's struggling exporters can thank the Obama administration's extended tax cuts for an expected bounce in cross-border sales this year, just in time to prop up the sagging recovery, according to a report.
The second round of stimulus by Washington and increased savings will whet the U.S. consumer's appetite for spending and make them more likely to buy factory goods made in Canada, said the Export Development Corporation (EDC), the government's export credit agency.
"The extra stimulus that was announced there has given the world economy a shot in the arm, and a very needed one," said EDC's chief economist Peter Hall.
The EDC sees Canadian merchandise exports growing 6.3 percent this year, up slightly from it's previous forecast of 6 percent and largely helped by hefty demand for cars. Including services, overall exports will rise 5.8 percent, it predicted.
Challenged by a strong Canadian dollar and weak U.S. demand, exporters contributed little to economic growth last year, with consumers, the housing market and government stimulus picking up the slack.
The current account deficit ballooned to a 20-year high, in part because import growth outpaced that of exports.
Canada sells about three-quarters of its total exports to the United States.
The Bank of Canada said this month it expects the sources of growth to rotate this year so that exports gather strength as domestic consumption softens.
Hall said the 2011 export growth is still below the double-digit expansion that normally accompanies a full-blown recovery.
"It's still butting up against the high dollar and competitiveness concerns that we have here in Canada, mostly on the productivity side," he said.
"The beauty of it is it's maintaining a decent clip while the domestic economy is showing signs of faltering."
Merchandise exports plummeted 26 percent in 2009 before partially recovering in 2010 with an estimated 10.6 percent gain.
Editing by Jeffrey Hodgson