Alberta won’t see much change to its overall export sales this year due to declining energy prices and volumes, says the chief economist of Export Development Canada (EDC).
But, says Stephen Poloz, “downturn is too harsh of a word.”
“(Alberta) is still well-employed, making lots of money. It’s just that the growth rate is going down. They’re selling lots of oil at a great price,” Poloz said in a recent interview.
Poloz spoke to several business audiences last week in Calgary, Edmonton and Vancouver to discuss the findings of a 115-page report recently issued by EDC and to venture some predictions for the upcoming year.
“As Alberta is heavily dependent on one sector, its export picture changes dramatically depending on how well the energy industry performs,” said Poloz, the senior vice- president at EDC.
“This year will see a reverse in the province’s overall export performance as both petroleum prices and natural gas volumes are on tap to decrease, despite a fairly good export growth forecast for the other sectors.”
Despite anticipated energy export declines of about four per cent for Alberta, Poloz presented a sunny overall forecast for the province’s economic future over the remainder of 2004 and into 2005.
He noted that Alberta’s total exports rose by 16.5 per cent in 2003 to $56.7 billion, and are expected to remain unchanged in 2004.
Energy sales is the largest export sector, accounting for 71 per cent or $40 billion, followed by industrial goods at 8.9 per cent or $5 billion and agri-food goods at almost 7.3 per cent or $4 billion.
The world is experiencing the first synchronized global economic expansion since 1996, he noted during a speech to the Vancouver Board of Trade.
“World economies are being led by China and India (10-per-cent and eight-per-cent growth, respectively). America is recovering, Russia is doing well.”
In the face of this rapid growth, Poloz points to indicators of a solid Canadian performance. “When Canadian exporters look out of the window this year, all they see are green lights,” he said. “What more could an exporter want? Well, maybe a 65-cent dollar . . .”
Despite the stress imposed by the stronger dollar on key elements of the manufacturing sector, a combination of global demand, higher resource prices and continued dollar stability is expected to yield a favourable and balanced profit picture in 2004.
More good news, said Poloz, is that the projected drop in Canadian exports as a result of the stronger dollar (up in the past year from 62 to 75 cents) has not materialized.
The EDC’s report released earlier this month noted that export volumes, when measured in terms of actual sales and adjusted for the exchange rate, are gathering momentum – up 6.9 per cent from a year ago and more than eight per cent from the low that resulted last August from the massive power blackout in Ontario and along the U.S.eastern seaboard.
Poloz noted that Canada’s export economy continues to thrive in spite of a few soft sectors that are spread across the nation.
He pointed to weaknesses in vehicle sales, oil and gas, and continuing troubles with softwood lumber, but noted that even accounting for these factors, the strength of the rest of Canada’s export economy leaves the country in a solid growth mode.
“The distinction between levels of activity and what is growing is often missed – and it’s a pretty important one,” Poloz told Business Edge, noting that profit margins don’t always reflect the level of productivity in a particular industry.
Telecommunications is also making a comeback as a growth sector. Poloz said he expects modest gains in the sale of computers and other consumer goods to increase, despite dropping prices.
Non-traditional trading partners in Asia, South America, Africa and the Middle East will experience a 30-per-cent growth of Canadian exports, he added, while exports will likely slow somewhat to Japan and Europe.
Trade with the U.S., while expected to grow, will probably show a modest recovery somewhere around four per cent, given the levelling-off anticipated for energy and auto exports.
Along with his glowing forecast, Poloz had a few reality checks to deliver. “High tide for the global economy is great, but it can last only for a short time,” he warned the Vancouver audience.
“Now is a good time to take your boat into foreign shores – the waters are deep and safer and the risks are less.”
Poloz advised companies to keep an eye on the Canadian dollar, which he said should level out at about the same value as in 2003. Another concern is energy costs, which will mean fewer profits unless a levelling-out occurs.
A third rocky shoal is the spectre of U.S. protectionism, though Poloz said he believed cooler heads are starting to prevail as companies are seeing the benefits of globalization.
Poloz said he is anticipating a slowdown in 2005 with a slightly less vigorous export economy as growth settles into a more manageable pace.
“Canadian exporting companies are working hard to cope with the stronger Canadian dollar, higher raw material prices and persistent geo-political uncertainty,” he added.
“But assuming no new major shock derails the global economy, Canada’s exporters can look forward to healthy increases in sales volumes in 2004 and 2005.”
EDC, which provides trade finance and risk management services to Canadian exporters and investors, is a Crown corporation that operates as a commercial financial institution.
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