High tides and clear sailing are in the forecast for Canadian exporters this year, and British Columbia may be leading the charge into the water, says the chief economist at Export Development Canada (EDC).
“The province has weathered the storm of 2003 and is now on much stronger footing,” EDC senior vice-president Stephen Poloz told the Vancouver Board of Trade last week.
“The B.C. economy is now projected to perform better than its counterparts in the rest of Canada. The bullish outlook is primarily a result of rising forestry exports, but also because of heightened demand from China for B.C.’s industrial goods.”
Poloz presented a sunny forecast of B.C.’s economic future for the remainder of 2004 and into 2005.
The world is experiencing the first synchronized global expansion since 1996, he said. “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 noted 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, he said.
More good news 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. An EDC 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 soft sectors 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 the Canadian exports economy leaves the country in a solid growth mode.
Strengthening demand in B.C.’s lumber, paper and pulp markets in the Far East should offset problems that plagued the industry in 2003. The EDC forecast predicted the ongoing Canada-U.S. softwood lumber dispute may well be countered by a robust demand for pulp from China and Japan.
Telecommunications is also making a comeback as a growth sector, Poloz said, and modest gains in the sale of computers and other consumer goods are expected to increase.
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 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 his B.C. 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 slow-down 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.
