Euler Hermes
Economic Outlook no. 1189-1190 |Macroeconomic, Risk and Insolvency Outlook
Canada
Momentum on hold
Overview Canada, like its southern neighbor, is expected to have only sluggish GDP growth in 2013, coming in at 2.1%, before a slight improvement in 2014 (+2.6%). Consumers will be restrained by slow employment growth and record high indebtedness. Exports will be under pressure from a weak U.S. economy and a strong Canadian dollar. Slow profit growth, uncertainty in the oil sands, and a slowing housing sector will hold back investment, but insolvencies will continue to fall. Conservative monetary, fiscal and banking policies give the country a strong competitive advantage going forward.
700 car
Household consumption likely to remain sluggish in 2013. Consumption is expected to grow at a sluggish 2.2% rate in 2013 (compare to +3.2% in aver- age between 1994 and 2008) before moderately picking-up to 2.4% in 2014. Unemployment will continue to fall only slowly, holding down incomes. At the same time a record high level of household debt will constrain borrow- ing which could have been used to fuel spending. So far, new restrictions on mortgage lending have had a limited effect on debt growth but have slowed the growth in housing prices.
External trade will continue to face downward pressure . Canada’s export sector will be under pressure in 2013 as its largest export market (80%), the U.S. will be experiencing anemic GDP growth of only 1.9%. A glut of energy in the U.S. will hold down oil exports. Exports may become less competitive as the Canadian dollar strengthens due to sound fiscal, monetary and banking systems. While current account reached a historical deficit, commodity prices could offset part of the drags on exports, if Europe and China strengthen more than expected in 2014 or if the U.S. dollar fall as a result of the Fed’s quantitative easing and of the Chinese economy.
12
Business environment is likely to remain resilient. Investment is likely to slow to a 2.2% in 2013 as soft profits are likely to put some investments on hold. Uncertainty surrounding the oil sands will slow energy sector investment. The slowdown in housing prices, con- straints on mortgages and a surfeit of inventory will make residential invest- ment particularly weak. Business con- ditions are not ideal for 2013, but they are good enough that business insol- vencies will continue to fall at a modest 3% pace. In 2014, the expected improve- ment in global economic activity bodes well for a moderate pick-up in invest- ment growth (+3.2%).
Policy mix is likely to remain favor- able. The Bank of Canada (BoC) is maintaining its “tightening bias” even in the face of a soft economy, but it is unlikely to raise rates until late in 2013. Fiscal policy will entail minor spending restraint and is expected to bring the budget into surplus by FY 2016 from its 2012 level of about 1.5% of GDP. Canada’s sound policies will be a com- petitive advantage since unlike other countries, it is unlikely that Canada will have to cut spending, raise taxes or raise interest rates rapidly to fight infla- tion._DN
Insolvencies in number of cases
12,000 15,000
3,000 6,000 9,000
0 9 9 9 9 9 0 0 0 0 0 1 1319753197531
Sources: Office of the Surintendant of Bankruptcy, Euler Hermes forecasts
Insolvencies by sector 2012 Number
Agriculture
Mining& energy Industry
Construction
69 20
263 468
Transport & communic. 142 Trade
473
Financial intermediaries 43 Business services
243
Education, wealth, adm. 178 Hotels & restaurants
* Jan-Sep '11 to Jan-Sep '12 Source: Office of the superintendent of bankruptcy
Economic forecasts CANADA
GDP
Consumer Spending Public Spending Investment Stocks Exports Imports
Net exports Current account
Unemployment rate Wages
Inflation General gov. balance ** ** 353
Other sectors & services 208 Total
change* Share of total
-2.8% 17.6%
-30.7%
2.8% 0.8%
-16.2% 10.7% -3.1% 19.0% 5.8%
-11.9% 19.2% -29.5% -3.2% -7.8%
-10.3%
1.7% 9.9% 7.2%
-6.6% 14.3% 8.5%
2,460 -10.3% 100%
Note pays structurelle
FFI
Country Risk Level AALOWCRI
L 1
Change over the period, unless otherwise indicated: * contribution to GDP growth ** CAD bn
forecasts
share 2011 2012 2013 2014 100% 2.6 56% 21% 23%
2.4 1.0 5.1
* * **
Current account (% of GDP) Employment
4% -4.1 30% 10.3 34% -3.0 -4%
2.0 2.1 1.9 0.2 3.1
-0.9 2.8
-0.5
4.0 -48 -2.7 1.5 7.5 2.5 2.9 -79
General
gov.balance (% of GDP) -4.5 Public debt (% of GDP) Nominal GDP
88
2.2 0.2 2.2 0.3 2.2 2.7
1.0 -0.2 -57 -58 -3.1 -3.1 1.0 7.3 2.6 1.6
0.9 7.2 2.6 2.0
-64 -57 -3.5 -3.0 90
Sources: IHS Global Insight, Euler Hermes forecasts 92
2.6 2.4 0.0 3.2 0.0 5.4 3.4 0.5 -49 -2.5 1.0 6.9 2.7 2.1 -50 -2.5 92
1,762 1,822 1,896 1,983
11,180
12,952 13,851
12,056
11,792 13,234
12,177 10,780 10,023 9,458 8,118 7,517 6,742
3,280 3,643
3,180 4,072 5,420
6,164 6,293
8,838
10,040 10,371
14,231
Page 1 |
Page 2 |
Page 3 |
Page 4 |
Page 5 |
Page 6 |
Page 7 |
Page 8 |
Page 9 |
Page 10 |
Page 11 |
Page 12 |
Page 13 |
Page 14 |
Page 15 |
Page 16 |
Page 17 |
Page 18 |
Page 19 |
Page 20 |
Page 21 |
Page 22 |
Page 23 |
Page 24 |
Page 25 |
Page 26 |
Page 27 |
Page 28 |
Page 29 |
Page 30 |
Page 31 |
Page 32 |
Page 33 |
Page 34 |
Page 35 |
Page 36 |
Page 37 |
Page 38 |
Page 39 |
Page 40 |
Page 41 |
Page 42 |
Page 43 |
Page 44 |
Page 45 |
Page 46 |
Page 47 |
Page 48 |
Page 49 |
Page 50 |
Page 51 |
Page 52