Ontario Exports to Decline in 2008 and Remain Flat in 2009, Says EDC Forecast

(Export Development Canada)

Ontario’s exports are expected to decline 7% in 2008 and rise a lukewarm 1% in 2009, according to the Global Export Forecast released today by Export Development Canada (EDC).

“Ontario’s exports will be battered this year by the high Canadian dollar and eroding U.S. sales,” said Peter Hall, Vice-President of Economics and Deputy Chief Economist. “Ontario is exposed to weakness in the auto sector and sliding demand for industrial goods. Both sectors are also impacted by the soaring currency.”

The auto sector accounts for 37.2% of Ontario’s international exports. Light vehicle sales in the U.S. are anticipated to reach no more than 15.0 million units in 2008, following average sales of 16.7 million units over the 2003 to 2006 period. The bleak outlook for auto sales has already led to production cutbacks in Ontario, with total vehicle output down 24% in January relative to only a 2.2% decline in U.S. production and an increase of 21% in Mexican production. As a result, EDC expects motor vehicle exports to decline 9% in 2008 before posting mild growth of 3% in 2009.

The industrial goods sector accounts for 30.5% of Ontario’s total exports. The U.S. economic downturn will also act to curb demand for this sector, with a projected decline of 9.5% in 2008 and 2.5% in 2009.

Although EDC expects 2008 to be a challenging year, the evolving global supply chain presents opportunities for Ontario exporters, particularly manufacturers of high value-added intermediary and final goods. Mexican light vehicle production has been rising steadily over the years and presents an opportunity for auto parts suppliers. Technical agricultural machinery and mining equipment are in strong demand in developing countries such as Russia and Ukraine, among other emerging markets. The ongoing infrastructure work and development of China’s industrial base also presents opportunity for exporters, not just resource exporters, but also producer-exporters of construction and industrial M&E.

Canadian exports are forecast to decline by 2% in 2008 before posting slight growth of 2% in 2009. Nationally, Canadian economic growth is forecast to decline to 1% in 2008 with a slight upturn to 2.3% in 2009. Internationally, EDC is forecasting a 3.8% growth rate in 2008 and 2009. EDC’s Global Export Forecast is available here.