OTTAWA, Ont. — It will be late 2010 before Canadian exports and the world economy rebound, according to the latest forecast from Export Development Canada (EDC).
“A general sequence of events, what EDC is calling the five waves of weakening, is underway and it gives light to the possible timing of a recovery,” said Peter Hall, EDC’s chief economist.“Working through the five waves is all about the economy getting back to balance.”
He made the comments to the Toronto Board of Trade as part of a speech entitled ‘Restoring Balance.’
Hall went on to describe the “five waves”: The collapse of the US housing market; The crash of the financial markets; A sharp drop in global demand, which is still underway; Mounting unemployment and continued layoffs; and finally the fifth wave, which has yet to be realized.
“What remains to be seen is the impact of these significant job losses on an already-stressed financial sector, which is the fifth wave of weakening. Default rates are almost sure to rise through 2009, and the way the system copes with the fallout will likely, in a big way, determine the timing of recovery,” predicted Hall.
He added “although wave five will be a lot to deal with, the global economy will get a large well-timed boost as governments’ stimulus measures are felt. Specifically, the impact of current interest rate reductions will be substantial, and fiscal packages announced around the world, when spent, will be massive when measured against global GDP.”
Hall predicted the positive effects of stimulus spending will be felt around the same time the fifth wave comes crashing down, offsetting its effects.
“How the outlook unfolds after that will depend, to a great degree, on the overall impact on confidence, which at present is extremely low,” Hall said.
To summarize, EDC is predicting a 1.3% decline in global GDP in 2009 and a 2.3% increase in 2010.
“From the current vantage point, it is difficult to imagine that the global economy will begin to recover much before the latter half of 2010,” said Hall.
Meanwhile, EDC expects Canada’s exports to decline 22% in 2009 before recovering 7.4% in 2010. By extension, EDC says Canada will see a 2% drop in GDP this year and 1.7% growth next year. EDC also predicted crude oil will drop from its average of US$100/barrel in 2008 to US$47/barrel in 2009 and then rising to $55/barrel in 2010.
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