OTTAWA — Canadian exports are expected to increase by 4% — slightly more than this year’s 3.2% growth — according to a forecast released yesterday by Export Development Corp.

Canadian export performance was hurt this year by declining commodity prices and depressed Japanese and Asian markets, the agency said. These combined effects stripped about four percentage points off Canada’s 1998 export growth, said EDC chief economist Jim Olts.

“The worst of these forces is probably behind us. But don’t expect strong improvement, either,” Olts warned.

He predicted that prices will stabilize in 1999, but continued excess capacity will subdue export markets.

“With deflationary pressures set to continue into 1999, Canadian exporters looking to grow their profit margins will have to redouble their productivity enhancing and cost controlling efforts,” he said.

Olts said the Asian economic contraction — a major negative force on Canadian export performance over the past year — appears to be bottoming out, offering some prospect of a recovery in these regions. And the combined impact of both lower Canadian interest rates and an under-valued dollar will help to keep Canadian exports competitive in an uncertain global economy.

“But exporters should not become too complacent about these forces,” he added.

At best, exporters can expect a slow tentative recovery in this market characterized by sporadic and gradual growth. Canada’s export prospects will be greatest in aerospace, telecommunications equipment and consumer goods industries, according to the EDC.

Forecast highlights of key export markets include:

> Exports to the United States are expected to grow just under 4.5% in 1999, down from 6.6% this year.

> Exports to Western Europe are expected to increase 2.5%, virtually the same growth as this year.

> Exports to Japan are expected to decline by 1.7% in 1999 following a 27% decline this year.

> Exports to Eastern Asia are expected to decline by 1.5%, following a 33% drop in 1998.

> Exports to China and India are expected to rise by 2% in 1999, following a 5.5% decrease this year

> Exports to Mexico are expected to decrease 1.3% in 1999, following an 8% increase this year.