OTTAWA (Reuters) - Canada’s export credit agency released an upbeat outlook for 2012 on Thursday, forecasting 7.1 percent growth in exports on the back of “outstanding” momentum fueled in part by a strong U.S. recovery.
Export Development Canada (EDC) also said exports would grow by 7.3 percent in 2013 and predicted a real, sustainable global recovery would start toward the end of 2012.
Canada is heavily dependent on exports of goods and services, which accounted for just over 31 percent of gross domestic product in 2011. Around 75 percent of all exports go to the United States.
“So far, things are looking good for Canadian trade, and export momentum is outstanding ... I think risk is on the upside for exports this year,” said Peter Hall, EDC’s chief economist.
Although Canadian exports rose by 10.8 percent in 2011, this figure disguised a major slump in the middle of the year. The pace started to pick up at the end of 2011 and is continuing into this year.
The improved performance comes despite challenges posed by a high Canadian dollar, uncertain foreign markets and tough competition.
Hall told Reuters that the United States and fast-paced emerging markets would be particularly important for Canada.
“U.S. consumers are showing that they’re getting back on their feet again,” he said in a phone interview, citing sales of autos and new housing as well as a rise in factory orders. “The indebtedness levels are down, their consumption growth has been sustained at a strong pace for quite a number of months now.”
The EDC forecasts the U.S. economy will grow by 3 percent next year, taking into account the end of stimulus measures and the expiration of tax breaks, which are set to strip 1.3 percent out of gross domestic product.
Emerging markets will grow by 5.7 percent next year after 5.1 percent in 2012, it said.
“We see a real, sustainable (global) recovery beginning toward the close of 2012,” Hall said.
Prices for oil and base metals - both important Canadian exports - will ease in 2013, further aiding the world recovery and therefore boosting orders. EDC sees the price of light crude averaging $95 next year, compared with around $103 on Thursday.
“Canada’s commodity producers may balk, but price levels will still be high enough to keep most projects viable. Lower prices will help other exporters by weakening the loonie (Canadian dollar),” Hall said.
Indeed, the EDC assumes the Canadian dollar will remain strong this year, buying US$1.01, before slipping to 97 U.S. cents in 2013 on weaker commodity prices. It was worth around US1.01 in early trading on Thursday.
The EDC forecast Canadian growth in 2012 of 2.0 percent - down from its October forecast - and 2013 growth of 2.2 percent. The Bank of Canada on Wednesday forecast growth in both 2012 and 2103 would be 2.4 percent.
Reporting by David Ljunggren; Editing by Peter Galloway