TORONTO (Reuters) - Canada and the United States will narrowly avoid a recession in 2008 as the global economy slows, but the Canadian export sector will contract by 2 percent on shrinking world demand, a government agency said on Tuesday.
Export Development Canada, a government-owned credit agency, said it expected Canadian exports to fall 2 percent in 2008, hampered by the weaker demand, a still-strong Canadian dollar, and lower commodity prices.
It sees Canadian growth slowing to 1 percent in 2008, from 2.5 percent in 2007, and rebounding to 2.3 percent in 2009.
“Technically, we avoid recession, but this is as close as it comes,” Peter Hall, the agency’s deputy chief economist, said at a speech in Toronto.
He said the United States will also miss falling into a recession, defined as two consecutive quarters of negative growth, but just by “dumb luck.”
The agency expects the U.S. economy to grow by 1.3 percent in 2008 and 1.8 percent in 2009. In 2007, U.S. GDP rose 1.9 percent.
It sees global growth at 3.8 percent in both 2008 and 2009, down from 4.7 percent in 2007, and Hall said that slowing growth made high commodity prices hard to justify.
The agency predicts base metal prices will tumble 40 percent by the end of the year. It puts oil at $70 a barrel by year-end, down from current levels of $119.
The lower commodity prices are expected to take some of the steam out of the Canadian dollar, and the agency expects the currency to fall to 90 U.S. cents by the end of 2008, from around 99 U.S. cents at present.
It expects broad-based losses for most Canadian export sectors, with the exceptions of agri-food, energy, and fertilizers as well as aircraft and parts.
The full report is available on the EDC Web site here
Reporting by John McCrank; editing by Janet Guttsman