Ont. to lead export growth on energy weakness, EDC says
10% increase will be driven by pent up US demand for automobiles and industrial machinery.
MONTREAL — Ontario is expected to lead all other provinces in export growth this year before a recovery in oil prices in 2016 restores the fortunes of energy-producing provinces like Alberta, according to a report by Export Development Canada.
After years of challenges, exports of goods from Canada’s manufacturing heartland are forecast to grow by 10% to $195 billion following last year’s 8% growth, courtesy of strong demand from a strengthening US economy and a weaker loonie.
The increase will be driven by pent up US demand for automobiles and industrial machinery, EDC says.
“That’s the first time in a long while that that kind of growth has happened for Ontario,” chief economist Peter Hall said from Burlington, Ont.
However, Ontario is forecast to move from best to worst in 2016 when its predicted 2% growth will trail far behind Alberta and Newfoundland and Labrador, whose exports are expected to grow 19% to $120 billion and $13.3 billion respectively.
The agency forecasts Canada’s exports of goods, which grew by 10.9% to reach $491.6 billion in 2014, is expected to remain flat this year and grow by 8% in 2016. The value of energy exports is forecast to drop 23% to $109 billion in 2015 even though volumes will rise modestly, and then grow by 23% in 2016.
Quebec is expected to pump out solid export growth mainly from its aerospace, automotive parts and forestry sectors, producing growth of 7% in 2015 and six per cent in 2016.
Aerospace is expected to lead with 17 and 20% growth over the next two years, helped by the entry into service of Bombardier’s CSeries aircraft. Metals and ores will see modest growth despite weaker prices, while lumber exports are forecast to rise six per cent on higher US housing starts.
The agency forecasts that oil prices – which dropped 34% since last year – will recover to US$61 a barrel in 2015 and to US$71 in 2016.
After growing by 9.4% last year, non-energy exports are forecast to increase by 9% this year to $381.1 billion and 3% in 2016. They will be led by fertilizers, aircraft and parts, advanced technology, automotive and consumer goods.
Agricultural and food exports are tapped to rise 8% in 2015 to $60.8 billion. Stronger demand particularly from Asia’s growing middle class is expected to boost seafood exports by 17% in 2015 on higher prices for lobster and crab.
Exports are forecast to slip in 2016 because of capacity constraints after years of under investment in Canada, especially in the automotive and machinery sectors, the EDC said.
Hall said industrial capacity constraints in the US creates a big opportunity for Canadian companies and could deliver stronger export growth than forecast.
“We’re looking at the possibility of a tsunami of investment in the U.S. and that’s going to be good for everybody,” he said.
EDC’s forecast for the American economy is 3.6% growth in 2015 and 3.3% in 2016. The outlook for Canadian GDP growth is 2.4% for both 2015 and 2016.
“If we can somehow find the capacity to meet the growth that’s coming our way then we could see brighter numbers, particularly for Central Canada,” Hall said.
Meanwhile, figures provided by the EDC show Canada’s territories will be the overall leader in export growth in 2015, rising 12% from $2.2 billion in 2014 before falling to 8% growth in 2016.
Other provinces and their predicted export growth in 2015 and 2016:
Prince Edward Island (9 and 4%), Nova Scotia (7 and 3%), New Brunswick (-10% and 11%), Manitoba (2% and 3%), Saskatchewan (-5% and 7%) and BC (5% and 6%).
© 2015 The Canadian Press