OTTAWA — The unexpected slowdown of the global economy is ushering in the greatest test of the post-recession period, according to Export Development Canada’s (EDC) Autumn 2010 Global Export Forecast.
Many thought that the sharp, six-month rebound that began a year ago signalled that the recovery was in full swing. But the economy got very quiet mid-way through this year and will remain weak for some time, said EDC chief economist Peter Hall.
“Recovery is still at least a year away, and navigating though this period will be challenging — a moment of truth for the world economy.”
Four drivers to global demand that will be challenged in the short term are:
• Big-market consumers. A huge source of global demand, they have been nervously been paying down debt and could be frightened into more excessive thrift.
• Stimulus spending has ended and there are doubts about the affordability and impact of more stimulus.
• Financial institutions remain reticent about lending.
• Slower growth is weighing down key emerging markets that thus far have buoyed overall demand.
Export Development forecasts that the global economy will grow by 4.2 per cent this year and 3.9 per cent in 2011.
In developed economies, growth will reach 2.4 per cent in 2010 and 2.1 per cent in 2011.
Emerging markets will generally be weaker, growing by 5.9 per cent in 2011 after expanding by 6.4 per cent this year.
The global numbers at first don’t look bad, but mask a weakening of the economy, Hall said.
Growth for 2010 is largely ended, while the 2011 forecast is expected in the latter part of the year.
EDC says Canadian export sales will remain 11 per cent below the pre-recession peak, with emerging weakness holding the increase to just six per cent in 2011.
The weakness is expected to be widespread, affecting export sales in most industrial sectors.
The sharp global rebound was good to primary producers, boosting demand and prices in the oil and base metals categories. But slower growth should weigh on commodity prices and dampen growth in 2011.
The Canadian dollar should remain strong, hovering at around 95 cents US in 2011.
“Managing through the upcoming slow months and a continued high dollar will require ingenuity and grit,” Hall said. “Slower growth promises even more intense competition, and the world’s largest economies, facing weak domestic conditions, are embarking on new export-led strategies aimed at more favourable demand elsewhere.”
EDC is Canada’s export credit agency, helping Canadian exporters and investors expand their international business.