Ottawa, May 27, 2021 – The Conference Board of Canada forecasts that it will take until the second half of 2022 before the country’s real exports return to pre-pandemic levels. (See attached report)
In 2020, Canada’s real exports plunged 10.2 per cent, as the global pandemic led to a collapse in demand from all its major trading partners. The recovery in the global economy, attributable to the widespread distribution of vaccines and a reopening of economies, will help Canada’s exports rebound with 4.5 per cent growth this year and 7.0 per cent in 2022.
“Canadian exports of goods and services will be boosted by the economic rebound in 2021 and 2022 but will slow over the medium term,” says Kip Beckman, Principal Economist at The Conference Board of Canada. “Canadian exports will grow the most in the Asia-Pacific region, particularly in India and China.”
The huge monetary and fiscal stimulus implemented by the U.S. Federal Reserve and President Joe Biden will result in a sharp rebound in economic activity south of the border this year, and this will boost overall export growth in Canada. However, ongoing trade tensions between China and the U.S. remain a wildcard when assessing Canadian exports to America.
While a rebound in exports is expected over the next 18 months, several factors could act as a drag on export growth. In addition to political tensions between the U.S. and China, there are also ongoing difficulties in moving Canadian oil to the U.S. Gulf Coast. A stronger Canadian dollar could also hurt growth in exports to the U.S. and other countries.
“Disputes between Canada and the U.S. will undoubtedly continue to crop up periodically, as they always have in the past,” says Mr. Beckman. “President Biden favours an ‘America First’ agenda that could hurt Canadian companies attempting to secure contracts for U.S. federal construction projects.”
While the rebound will lift Canada’s total exports back up to 2019 levels in 2022, the medium-term outlook is lacklustre. Canada’s trade sector was underperforming even before the pandemic occurred in March 2020 due to a lack of capacity in some manufacturing industries, intense competition from China, and ongoing difficulties in shipping Canadian oil to the U.S.
Even a Canadian dollar that was well below US$0.80 since 2015 did not significantly increase exports to the key U.S. market. These structural challenges remain and will restrain export growth between 2023 and 2025.
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