Professional Documents
Culture Documents
Worst Enemy?
2.0 Country Risk Overviews Peter Hall, Vice-President and Chief Economist
Tina Drew, Administrator
3.0 Sector Overviews
Table of Contents
1.5 Is Protectionism
Coming Back?
1.3 Broken BRICS Euro Area -0.3 0.9 1.5 1.5 1.8
Coming Back? Latin America and the Caribbean 2.9 1.3 -0.3 -0.1 1.3
2.0 Country Risk Overviews Emerging Europe 4.2 3.4 1.8 0.5 2.0
Currencies
Commodity Prices
Lumber (WSPF, US$ per thbf) $355 $349 $278 $264 $306
Other
Developed Markets
Table of Contents Its actually possible, in most cases, to estimate the potential that each of these countries presents. Long-run growth
is generally well known, being driven largely by demographics. Another key factor is infrastructure, and there are
1.0 GEF Executive Summary
well-used means of estimating infrastructure deficits. Shorter-term labour dynamics also speak to the economys
1.1 Is Growth Its Own capacity to facilitate rapid growth. In all cases of closed economies, the potential is substantial.
Worst Enemy?
So much for the opportunity; what about the risks? These are usually considerable as well. The chaos that typically
1.2 When Markets accompanies reopening reduces the predictability of growth itself and the channels through which growth will
Reopen proceed. Clearly, those interested in engagement need to be informed, connected and also armed with key risk
mitigation tools. Its not for the faint of heart but the rewards can be transformational.
1.3 Broken BRICS
The bottom line? Once in a while, huge opportunities come along. Today, there seems to be a considerable lineup
1.4 Hot States,
of actual and potential growth bonanzas in countries that are reopening to global commerce. The risks can seem
Not States
daunting, but the list of opportunities is finite, as is the window for participating in the instant rush of new activity.
1.5 Is Protectionism It doesnt hurt to at least look.
Coming Back?
Table of Contents
2.1 Brazil
2.2 China
2.3 France
2.4 Germany
2.5 India
2.6 Japan
2.7 Mexico
2.8 Russia
2.2 China Average default rate on credit commitments of one year or less on the part of commercial obligors in a country.
2.3 France
Payment Experience
2.4 Germany
Measured by the number and size of EDC claims experienced in a particular country, over a period of a year,
2.5 India
relative to EDCs business volume growth.
2.6 Japan
Positive: The number of claims, or the amounts claimed have decreased in proportion to EDC business
2.7 Mexico
volume growth.
2.8 Russia
Neutral: The number of claims, or the amounts claimed have remained unchanged in proportion to EDC
2.9 South Africa
business volume growth.
2.10 United Kingdom
Negative: The number of claims, or the amounts claimed have increased in proportion to EDC business
2.11 United States
volume growth.
3.0 Sector Overviews
Medium-Long-Term Commercial
4.0 Provincial Overviews
High The likelihood, over the medium to long term of government action (e.g. outright seizure of an asset/
investment or less pronounced interference such as unjustified non-renewal of required permits or licences)
Prohibitive
or weak governance conditions (e.g. a weak rule of law or high levels of corruption) having a significant impact
No Information on a countrys commercial environment.
Political Violence
The likelihood, over the medium to long term, of an act of political violence occurring in a country that
significantly impacts the countrys commercial environment. Political violence events can include acts of
war (declared or undeclared), insurrection, revolution, rebellion, riot, terrorism, sabotage, civil disturbance,
or other such violent acts that are politically motivated.
Sovereign
The Sovereign Probability of Default (SPD) measures the ability and willingness of a sovereign to honour
its financial obligations over the medium to long term.
% of GDP
2.4 Germany This is driven by depressed commodity prices, weaker
0 0
domestic demand, and internal challenges. The real will
2.5 India
continue experiencing downward pressure this year due
-5 -5
2.6 Japan to bearish economic activity and political uncertainty.
The sharp drop in the currency has helped push -10 -10
2.7 Mexico
inflation above 10%. Despite the various challenges,
2.8 Russia a high level of foreign exchange reserves continues Current Account Balance
to result in overall benign liquidity conditions for the Real GDP Growth
2.9 South Africa
commercial sector.
2.10 United Kingdom
World Bank Governance Indicators
Medium-Long-Term Commercial
2.11 United States 100
3.0 Sector Overviews Commercial Country Ceiling
Expropriation
4.0 Provincial Overviews
Transfer and Conversion 55
47 50
Political Violence 50 44
% of GDP
2.4 Germany with overcapacity and leverage. Equity market turmoil,
0 0
the recent currency devaluation, and the slowing
2.5 India
economy continue to impact sentiment. The yuan
-5 -5
2.6 Japan will be somewhat more volatile than in previous years
as authorities now manage the currency against a basket -10 -10
2.7 Mexico
of currencies versus solely against the USD. Volatility
2.8 Russia though is unlikely to be de-stabilizing given the policy Current Account Balance
options available to authorities. Credit and payment Real GDP Growth
2.9 South Africa
risks are rising as the economy slows, margins get
2.10 United Kingdom compressed, and core parts of the economy restructure.
World Bank Governance Indicators
2.11 United States 100
Medium-Long-Term Commercial
3.0 Sector Overviews
Commercial Country Ceiling 66
4.0 Provincial Overviews
Expropriation
Transfer and Conversion 50 47 45 43
Political Violence
Risk Rating Lexicon
% of GDP
2.4 Germany to underperform regional peers. Rising consumer
0 0
confidence, low oil prices, and positive credit growth
2.5 India
offer tailwinds to domestic consumption. Expansionary
-5 --5
2.6 Japan monetary policy and the weaker euro are supportive
of the regional economic upswing, lifting external -10 --10
2.7 Mexico
demand. However, structural weaknesses in the
2.8 Russia French economy, including high unemployment Current Account Balance
and competitiveness challenges, will restrain growth. Real GDP Growth
2.9 South Africa
The recent approval of measures, such as the Macron
2.10 United Kingdom Law labour market reform and measures to tackle
World Bank Governance Indicators
high unemployment and deregulate goods and services
2.11 United States 100 88 89 88
markets, should lead to competitiveness gains. 82
3.0 Sector Overviews
Medium-Long-Term Commercial
4.0 Provincial Overviews
% of GDP
2.4 Germany surpluses, and highly competitive and dynamic
0 0
business sector. The economy is forecast to grow
2.5 India
by 1.7% in 2016 and 2017 as it benefits from the
-5 -5
2.6 Japan cyclical upswing in the Eurozone and US economies,
the low interest rate environment, the depreciated -10 -10
2.7 Mexico
euro, and low oil prices. Strengthening domestic
2.8 Russia demand supports the ongoing rebalancing away Current Account Balance
from over-reliance on exports, although Germany Real GDP Growth
2.9 South Africa
remains susceptible to any slowdown in demand for
2.10 United Kingdom its exports from emerging markets. That said, robust
World Bank Governance Indicators
macroeconomic and policy fundamentals support
2.11 United States 100
resilience to external shocks. 95 95 94 93
3.0 Sector Overviews
Medium-Long-Term Commercial
4.0 Provincial Overviews
% of GDP
2.4 Germany pressures. This has allowed for a larger-than-anticipated
0 0
rate cut to boost growth and investment. Growth is
2.5 India
expected to be relatively robust in 2016, in the 7%
-5 -5
2.6 Japan range. Foreign exchange (FX) reserves, reflecting
accommodative monetary conditions and oil prices, -10 -10
2.7 Mexico
are up. Given its FX build-up (around nine months of
2.8 Russia import cover), India is now more prepared to deal with Current Account Balance
currency volatility that may arise as a result of global Real GDP Growth
2.9 South Africa
instability.
2.10 United Kingdom
World Bank Governance Indicators
Medium-Long-Term Commercial
2.11 United States 100
3.0 Sector Overviews Commercial Country Ceiling
Expropriation
4.0 Provincial Overviews
Transfer and Conversion 54
Political Violence 50 45
39
35
Risk Rating Lexicon
Foreign Direct Investment is expected to continue rising
Low due to a sense of an improved business and investment
environment. After more than a year, though, lack of 0
Low-Medium
political support at the state level and absence of any Control of Government Regulatory Rule of Law
Medium structural reforms (such as taxation, land ownership, Corruption Effectiveness Quality
and labour laws) have dampened earlier optimism about
Medium-High
PM Modi. Political violence remains concentrated in The percentile rank term ranges from 0 (lowest rank)
High the northeastern states, and cross-border skirmishes to 100 (highest rank).
with Pakistan continue to be localized.
Prohibitive
Public Finances
No Information Sovereign
100
15
Sovereign Probability of Default 10
Risk Rating Lexicon 50
5
Fiscal consolidation is anticipated in coming years.
Positive 0 0
Public debt levels are much higher for India than for
Neutral economies with similar ratings and non-performing -5
loans, especially related to state-owned banks, continue -50
-10
Negative
to be a troubling factor, but the strong medium- to -15
long-term growth projection will afford the government -100
some policy space. What is needed are fiscal reforms 2014 2015 2016 2017 (f)
regarding subsidies, privatization of government-
related entities, and improvements in the tax system to
Fiscal Balance (% of GDP)
strengthen revenue generation. Nevertheless, external
sovereign debt obligations are quite small, which Public Debt (% of GDP)
insulates the Indian government.
Sources: EDC Economics, World Bank,
Haver Analytics, EIU
% of GDP
2.4 Germany remain subdued, and growth in 2016 is expected to be
0 0
lacklustre. Aggressive monetary easing along with some
2.5 India
structural reforms has somewhat restored domestic
-5 -5
2.6 Japan confidence in the economy, but it remains fragile.
Real wage rates continue to disappoint, even though -10 -10
2.7 Mexico
unemployment is at a 20-year low, increasing policy
2.8 Russia challenges. The governments target of achieving 2% Current Account Balance
inflation continues to get pushed back. Realizing these Real GDP Growth
2.9 South Africa
challenges, the BOJ moved further into unchartered
2.10 United Kingdom territory and introduced negative interest rates.
World Bank Governance Indicators
2.11 United States 100 97 89
Medium-Long-Term Commercial 93 84
3.0 Sector Overviews
Commercial Country Ceiling
4.0 Provincial Overviews
Expropriation
Transfer and Conversion 50
Political Violence
Risk Rating Lexicon
% of GDP
2.4 Germany Mexican manufacturing exports. A sharp decline in oil
0 0
prices has dented public spending plans for the coming
2.5 India
year and has also driven the peso to depreciate by
-5 -5
2.6 Japan almost 20%. This has been a good shock absorber for
external volatility and has not pushed inflation up yet. -10 -10
2.7 Mexico
Liquidity concerns are low as foreign currency reserves
2.8 Russia are high. All eyes will remain focused on the impact Current Account Balance
of the US Federal Reserves rate hike, which may see Real GDP Growth
2.9 South Africa
further capital flows exiting the emerging markets,
2.10 United Kingdom including Mexico.
World Bank Governance Indicators
2.11 United States 100
Medium-Long-Term Commercial
3.0 Sector Overviews
Commercial Country Ceiling 67
4.0 Provincial Overviews 61
Expropriation
Transfer and Conversion 50
38
Political Violence
Risk Rating Lexicon 26
Low The commercial environment is supported by a stable
macroeconomic landscape, an improving business 0
Low-Medium
climate, and strong banking sector. High levels of Control of Government Regulatory Rule of Law
Medium corruption and government bureaucracy, as well as an Corruption Effectiveness Quality
inefficient legal system, drive expropriation risks. The
Medium-High
main source of violence in Mexico is criminal rather The percentile rank term ranges from 0 (lowest rank)
High than political, which poses a significant threat to the to 100 (highest rank).
countrys security. Localized environmental opposition
Prohibitive
is increasingly an area of concern for extractive Public Finances
No Information companies. The structural reforms being implemented
over the coming years will open up the energy and 100
15
telecommunications sectors to increased competition 10
Risk Rating Lexicon and foreign investment. 50
5
Positive 0 0
Sovereign
Neutral -5
Sovereign Probability of Default -50
-10
Negative
-15
A relatively low level of government indebtedness with -100
a manageable debt service ratio supports the sovereign 2014 2015 2016 2017 (f)
rating. The countrys small current account deficit is
easily financed by Foreign Direct Investment inflows
Fiscal Balance (% of GDP)
Significant structural reforms, most notably on energy,
will continue to be implemented over the coming years. Public Debt (% of GDP)
This will improve Mexicos medium- to long-term
growth prospects, competitiveness, and creditworthiness. Sources: EDC Economics, World Bank,
Sustained low oil prices would pose a risk to public Haver Analytics, EIU
finances as oil revenues account for approximately
one-third of federal spending.
% of GDP
2.4 Germany USD from the start of 2015. Foreign exchange reserves
0 0
are down roughly USD 100 bn since 2014, as the
2.5 India
central bank had intervened in the FX markets in an
-5 -5
2.6 Japan attempt to shore up the currency. Non-performing
loans are expected to rise as access to credit is -10 -10
2.7 Mexico
tightened. Continued currency weakness is likely, given
2.8 Russia the current weak oil price outlook. Current Account Balance
% of GDP
2.4 Germany environments on the continent. Nevertheless, economic
0 0
and export growth has been sluggish. The volatility of
2.5 India
the rand, reflecting weakened investor sentiment due
-5 -5
2.6 Japan to persistent strike action, high labour costs, and low
growth prospects, remains a risk over the short term. -10 -10
2.7 Mexico
GDP growth hovered around 2% in recent years but
2.8 Russia will drop to 1.5% in 2016. Current Account Balance
% of GDP
2.4 Germany of its European peers. Although the relatively robust
0 0
pace of expansion will reduce excess capacity, growth
2.5 India
remains driven mainly by domestic consumption amid
-5 -5
2.6 Japan supply-side disinflationary pressures. The British pound
has been appreciating against the euro particularly -10 -10
2.7 Mexico
since the announcement of the European Central
2.8 Russia Banks quantitative easing program, and inflation Current Account Balance
remains well below target. In this context, the Bank of Real GDP Growth
2.9 South Africa
England is likely to refrain from raising interest rates
2.10 United Kingdom until later in 2016.
World Bank Governance Indicators
2.11 United States 100 97
Medium-Long-Term Commercial 93 93 94
3.0 Sector Overviews
Commercial Country Ceiling
4.0 Provincial Overviews
Expropriation
Transfer and Conversion 50
Political Violence
Risk Rating Lexicon
% of GDP
2.4 Germany the current market turbulence, which has sparked
0 0
fears over a broader economic slowdown. Growth
2.5 India
over the next few years is projected to remain
-5 -5
2.6 Japan robust, driven primarily by solid domestic demand
fundamentals, particularly by household consumption -10 -10
2.7 Mexico
and a recovering housing market. Net exports are
2.8 Russia dragging on growth amid tepid foreign demand Current Account Balance
and a strong greenback. Following its first rate hike Real GDP Growth
2.9 South Africa
in December 2015, the Federal Reserve is expected
2.10 United Kingdom to continue raising rates this year amid tight labour
World Bank Governance Indicators
market conditions, but the pace of increases is a key
2.11 United States 100 89 90 88 90
uncertainty given renewed market volatility.
3.0 Sector Overviews
Medium-Long-Term Commercial
4.0 Provincial Overviews
Table of Contents
3.1 Energy
3.3 Agri-Food
3.4 Fertilizers
3.6 Automotive
3.9 Aerospace
3.10 Chemicals
and Plastics
3.12 Services
Table of Contents Canadian exports of goods and services are projected to see growth of 2% in 2016. All sectors will see growth with
the exception of three: energy, fertilizers, and chemicals and plastics. The broad-based growth is supported by
1.0 GEF Executive Summary
growing US demand and a weaker Canadian dollar. This contraction in energy will be offset by the strong growth
2.0 Country Risk Overviews (13%) in aircraft and parts. The pace of growth in exports to emerging markets versus developed markets will be
similar in 2016; 2% growth in both segments.
3.0 Sector Overviews
Energy will see the largest contraction in 2016 (14%) owing to continued weak oil prices. Although crude oil
3.1 Energy
volumes are set to continue growing this year and next, these higher volumes will not outweigh the lower price
3.2 Metals and Ores effect. Canadian energy exports will post an 18% rebound in 2017 as prices stage a partial recovery.
3.3 Agri-Food Most manufacturers stand to gain from the lower value of the Canadian dollar and healthy demand. Aerospace
exports will post an impressive 13% rise in 2016 with the entry into service of Bombardiers CSeries aircraft in mid-
3.4 Fertilizers
2016. Growth in 2017 will decline somewhat but remain a solid 7%. The auto sector will see 10% growth this year
3.5 Forestry Products as American shoppers replace older car models.
3.6 Automotive Industrial commodities and building materials, including metals, ores and forestry products, will post gains ranging
from 4% to 6% over the two-year forecast horizon, generally driven by recovering US demand.
3.7 Industrial Machinery
and Equipment
Table 3: Canadian Merchandise Export Forecast by Sector
3.8 Advanced Technology
Sources: Statistics Canada, EDC Economics, 2015 is actual data while 2016 and 2017 are forecast.
Special transactions* mainly low-valued transactions, value of repairs to equipment and goods returned to country of origin.
Figure 1: US Oil Inventory Drives Oil Price Lower Table 4: Energy Export Outlook by Region
140 500,000
% Share of Export Outlook
CAD bn Exports (% growth)
120 450,000 TOP MARKETS 2015 2015 2015 2016 (f) 2017 (f)
Developed Markets
United States 93.8 95.0 -29.6 -15 18
100 400,000
Western Europe 1.4 1.4 -63.5 -14 15
Emerging Europe
0.3 0.3 41.9 -5 5
and Central Asia
40 250,000
Africa and
0.0 0.0 -69.1 -8 10
the Middle East
Sources: Haver Analytics, Energy Information Administration Sources: Statistics Canada, EDC Economics
Figure 2: Canadian Major Metal and Ore Exports Table 5: Metals and Ores Export Outlook by Region
16 Developed Markets
United States 39.9 54.9 3.2 6 6
14 Western Europe 18.9 26.0 -1.7 3 3
Gold
12 Japan, Oceania and
6.0 8.3 -16.1 4 4
CAD Billions
Developed Asia
Non-ferrous
10 Emerging Markets
Metals
Latin America
1.6 2.2 3.8 4 5
and the Caribbean
8 Aluminum
Emerging Europe
0.4 0.6 -2.5 2 5
6 and Central Asia
Iron Ore
Africa and
1.2 1.7 -4.5 3 7
4 the Middle East
Copper, Nickel,
Lead and Zinc Ore Emerging Asia 4.6 6.3 -7.4 -1 3
2
Total Developed
64.9 89.2 -0.3 5 5
Markets
0
Total Emerging
06 07 008 009 010 011 012 013 014 015 Markets
7.8 10.8 -2.8 1 4
20 20 2 2 2 2 2 2 2 2
Total World 72.7 100.0 -0.6 4 5
Figure 3: World Supply and Demand Rebalancing After Price Super-Cycle High (2005=100) Table 6: Agri-Food Export Outlook by Region
250
Commodity Food and Beverage Price Index Inc % Share of Export Outlook
Food and Bev Price Indexes CAD bn Exports (% growth)
Commodity Cereals Price Index Inc Wheat, TOP MARKETS 2015 2015 2015 2016 (f) 2017 (f)
Maize [Corn], Rice, and Barley
200 Developed Markets
Commodity Vegetable Oil Index Inc
United States 32.4 53.0 10.5 6 2
Various Price Indices
World: Commodity Meat Price Index Western Europe 3.5 5.7 -7.3 -1 5
Latin America
4.3 7.0 -0.8 -4 5
and the Caribbean
100
Emerging Europe
0.8 1.3 -24.8 2 6
and Central Asia
Africa and
3.0 4.9 0.6 3 6
the Middle East
50
Emerging Asia 11.2 18.3 31.6 4 6
Total Developed
41.9 68.5 6.4 5 2
Markets
0 Total Emerging
19.3 31.5 14.4 2 6
Markets
1980 1985 1990 1995 2000 2005 2010 2015 2020 (f) Total World 61.2 100.0 8.8 4 3
Sources: International Monetary Fund/World Economic Outlook Database, October 2015 Sources: Statistics Canada, EDC Economics
3 Weaker ruble makes Russian exports more competitive % Share of Export Outlook
Index: Jan 2013 =100
2.5 CAD bn Exports (% growth)
TOP MARKETS 2015 2015 2015 2016 (f) 2017 (f)
2
Developed Markets
1.5
United States 5.5 62.8 25.3 -5 2
1 Western Europe 0.0 0.3 -39.0 0 4
0.5 Japan, Oceania and
CAD/USD Russian Ruble/USD 0.1 1.0 59.2 18 3
Developed Asia
0
1 7 1 1 5 7 1 1 3 5 7 1 1 Emerging Markets
-0 -03 -05 3-0 3-09 13-1 4-0 4-03 4-0 4-0 4-09 14-1 5-0 5-0 5-0 5-0 5-09 15-1 6-0
13 13 13 1 1 20 1 1 1 1 1 20 1 1 1 1 1 20 1
20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 Latin America
1.1 12.6 54.6 -5 1
and the Caribbean
2
Weakening importer currencies make Potash imports pricier Emerging Europe
0.0 0.0 20.4 -2 5
Index: Jan 2013 =100 and Central Asia
1.5
Africa and
0.0 0.2 -34.4 1 5
the Middle East
1 Emerging Asia 2.0 23.2 28.5 -5 8
Total Developed
0.5 5.7 64.1 25.2 -4 2
Markets
Chinese Yuan/USD Brazilian Real/USD Malaysian Ringgit/USD
Indonesian Rupiah/USD Indian Rupee/USD Total Emerging
3.2 35.9 36.0 -5 6
0 Markets
1 7 1 1 5 7 1 1 3 5 7 1 1
-0 -03 -05 3-0 3-09 13-1 4-0 4-03 4-0 4-0 4-09 14-1 5-0 5-0 5-0 5-0 5-09 15-1 6-0 Total World 8.8 100.0 28.8 -5 3
13 13 13 1 1 20 1 1 1 1 1 20 1 1 1 1 1 20 1
20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20
Sources: Statistics Canada, EDC Economics, Green Markets*
Source: Haver Analytics * Global Potash Supply and Demand Model is reproduced with full written permission of Kennedy information, LLC 2015.
For pulp and paper exports, the weakness of the loonie compared with the
US dollar has provided companies with a competitive edge in North America
relative to US firms. In newsprint, although the overall size of the market is
expected to decline, the Canadian share of the total is forecast to increase as a
result of this currency edge. However, Canada has lost the currency advantage
in the pulp sector as the relative weakness of the Russian ruble and Brazilian
real has made their hardwood and eucalyptus grades of pulp significantly
more competitive. This will constrain Canadian pulp exports.
Figure 5: Canadian Forestry Exports Continue to Track US Housing Demand for Now Table 8: Forestry Export Outlook by Region
140 4,000
% Share of Export Outlook
CAD bn Exports (% growth)
120 3,500
TOP MARKETS 2015 2015 2015 2016 (f) 2017 (f)
Developed Markets
3,000
Thousands of Units (SAAR)
80
Japan, Oceania and
2.5 7.3 -0.1 0 5
2,000 Developed Asia
60 Emerging Markets
1,500 Latin America
0.7 2.0 -7.9 2 4
and the Caribbean
40
1,000 Emerging Europe
0.2 0.5 -16.2 3 8
and Central Asia
Sources: EDC Economics, Haver Analytics Sources: Statistics Canada, EDC Economics
Figure 6: Strong Demand Fundamentals, Rebounding Volumes Table 9: Automotive Export Outlook by Region
Figure 7: Demand Indicators for M&E Table 10: Industrial M&E Export Outlook by Region
85 10 Africa and
1.2 3.5 -13.2 5 5
the Middle East
Figure 8: Niche Subsectors Benefit from US Recovery (y/y) Table 11: Advanced Technology Export Outlook by Region
United States Western Europe Asia Total World 16.1 100.0 10.3 9 2
Figure 9: Strong Growth in Passenger Traffic Propels Export Demand Table 12: Aerospace Export Outlook by Region
1,200
Revenue Passenger Kilometers Index (Jan. 2010 = 100)
1,000 TOP MARKETS 2015 2015 2015 2016 (f) 2017 (f)
Developed Markets
United States 10.7 64.7 18.2 14 8
800 Western Europe 3.0 18.1 13.1 17 7
North America Europe Middle East Total World 16.5 100.0 14.0 13 7
Latin America Asia Africa
Sources: IATA, Haver Analytics, EDC Economics Sources: Statistics Canada, EDC Economics
Exports of plastics will expand 11% this year followed by 6% next year.
Volumes remain in line with our outlook for the US economy and consumer
demand, which is partially driven by a double-digit jump in housing starts this
year and next. The packaging industry is also expected to continue benefiting
from rising exports to the US as healthy consumer demand is boosting retail
sales. Investing in R&D to develop environmentally friendly production methods
in line with shifting consumer preferences will be a potential growth opportunity
for the sector.
Figure 10: Canadian Pharmaceuticals Getting Big Boost from U.S. Health Spending Table 13: Chemicals and Plastics Export Outlook by Region
Africa and
-2% 0.4 0.9 5.9 -8 6
-10% the Middle East
Source: IMS Institute for Healthcare Informatics Sources: Statistics Canada, EDC Economics
25.00
% Share of Export Outlook
CAD bn Exports (% growth)
20.00
TOP MARKETS 2015 2015 2015 2016 (f) 2017 (f)
Total Emerging
-25.00 0.4 4.2 19.8 7 4
Markets
2007 2008 2009 2010 2011 2012 2013 2014 2015
Total World 9.9 100.0 29.6 14 2
Sources: Haver Analytics, Industry Canada Sources: Statistics Canada, EDC Economics
Figure 12: Tourism Boosted by Confidence, Lower Gas Prices and Stronger USD Table 15: Canadian Export Services Outlook
180
2013 2014 2015 2016 (f) 2017 (f)
Total Service
92,802 95,745 99,201 103,210 107,580
Exports ($ mn)
160
annual % change 4 3 4 4 4
Commercial
58,658 59,983 61,945 64,034 66,843
140 Services ($ mn)
annual % change 4 2 3 3 4
Transportation
120 Services ($ mn)
14,507 14,941 15,179 15,679 16,155
annual % change 3 3 2 3 3
annual % change 5 6 6 7 5
80
Government Services
1,437 1,525 1,595 1,649 1,705
($ mn)
60 annual % change -6 6 5 3 3
Sources: Haver Analytics, The Conference Board, Energy Information Administration, EDC Economics
(*) US Consumer Confidence data for 2016 is average from January to February Sources: Statistics Canada, EDC Economics
Table of Contents
4.1 Newfoundland
and Labrador
4.5 Quebec
4.6 Ontario
4.7 Manitoba
4.8 Saskatchewan
4.9 Alberta
Table of Contents Canadian merchandise exports will grow at a tepid pace of 2% in 2016
with negative growth in the energy, fertilizer, and chemicals and plastics
1.0 GEF Executive Summary
sectors forecast to overshadow manufactured goods. In 2017, the gradual
2.0 Country Risk Overviews strengthening of natural gas and crude oil prices will put energy-
exporting provinces in the drivers seat and allow them to steer Canadian
3.0 Sector Overviews
exports toward a 6% expansion.
4.0 Provincial Overviews
As was the case in 2015, Newfoundland and Labrador, followed
4.1 Newfoundland by Alberta, will be the hardest hit provinces in Canada this year as low natural gas and crude prices cause their
and Labrador exports to contract by 11% and 10%, respectively. In New Brunswick and Saskatchewan, the story will be
much the same with weak refined and crude oil prices accounting for shrinking exports in 2016, even in the face of
4.2 Prince Edward Island
strong performances by their non-energy industries. Out of the five Canadian provinces for which the energy sectors
4.3 Nova Scotia comprise a significant share of total exports, it is telling that only British Columbia, where energy made up only
one-fifth of all exports in 2015, will see exports grow, albeit by a modest 2%.
4.4 New Brunswick
Headline figures are markedly different for Canadas manufacturing strongholds Ontario and Quebec, where the
4.5 Quebec
weaker Canadian dollar and high US demand are forecast to drive gains of 7% and 5%, respectively, in 2016. In
4.6 Ontario Ontario, the automotive sector is expected to post a 10% export expansion, while Quebecs aerospace industry will
see its sales abroad increase by 14%. Manitobas exports are also on track to climb by 4%, supported by increased
4.7 Manitoba
US demand for buses and aircraft parts manufactured in the province.
4.8 Saskatchewan
Even in Atlantic Canada, manufacturing is forecast to provide a significant boost to the bottom line of two provinces.
4.9 Alberta Responding to strong US auto demand, Nova Scotias tire industry is expected to fuel a 6% rise in overall exports
in 2016. In Prince Edward Island, manufacturers in the aerospace industry are the source of similar momentum
4.10 British Columbia
and will power a 7% increase in exports. Strong US and global demand for seafood will also be key to the export
performance of both provinces.
% Share of
Province's Export Outlook
CAD bn Total Exports (% growth)
PROVINCES 2015 2015 2015 2016 (f) 2017 (f)
Newfoundland and Labrador* 9.1 1.9 -30 -11 18
Prince Edward Island 1.2 0.3 16 7 6
Nova Scotia 5.3 1.1 1 6 4
New Brunswick 12.2 2.5 -6 -6 9
Quebec 79.7 16.6 7 5 5
Ontario 195.9 40.8 10 7 3
Manitoba 13.9 2.9 3 4 5
Saskatchewan 32.4 6.8 -8 -3 8
Alberta 92.2 19.2 -24 -10 14
British Columbia 35.9 7.5 0 2 5
Territories 1.8 0.4 -18 -18 0
Total Goods Exports 479.6 100.0 -3 2 6
Sources: Statistics Canada, EDC Economics
*Includes EDC estimate for crude oil exports (*not included in national total from Statistics Canada)
Newfoundland and Labradors agri-food sector, dominated by seafood, will Share of Exports to
benefit from the persistently strong price of shrimp and somewhat higher Emerging Markets
prices for crab, as well as the weak Canadian dollar. Together, these factors will 2015: 9.2%
offset falling volumes in shrimp and crab. Exports are expected to grow by 4% 2010: 12.87%
in 2016 and a mere 2% in 2017.
Trade Diversification Index
The balance of the provinces exports includes a broad basket of goods, (100=total concentration in
including machinery, motor vehicle parts and aerospace. Manufacturing, a single sector/region and
except for petroleum-related exports, will continue to see strong activity going 0=completely diversified)
into 2016. We expect exports in this diversified category to benefit significantly Sector Diversification: 48.8%
from the drop in the Canadian dollar in 2016 before moderating in 2017. Regional Diversification: 47.9%
Figure 13: Low Commodity Prices Eat Away at Exports to Non-Traditional Markets Table 17: Newfoundland and Labrador Merchandise Outlook
50
Total 9,081 100.0 -30.2 -11 18
0
Total excl. energy 2,941 32.4 -8.6 3 10
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Figure 14: PEI Aerospace Export Destinations Are Increasingly Diversified Table 18: Prince Edward Island Merchandise Outlook
100%
% Share of Export Outlook
90% Province's
Other CAD mn Total Exports (% growth)
80%
TOP SECTORS 2015 2015 2015 2016 (f) 2017 (f)
70%
Europe Agri-Food 654.4 53.1 11.9 9 6
60%
millions
10%
Total 1231.4 100.0 15.7 7 6
0%
Total excl. energy 1231.4 100.0 16.0 7 6
2010 2011 2012 2013 2014 2015
Sources: Industry Canada, EDC Economics Sources: Statistics Canada, EDC Economics
Figure 15: Nova Scotias Seafood Exports Table 19: Nova Scotia Merchandise Outlook
Millions CAD
% Share of Export Outlook
1,000 Province's
CAD mn Total Exports (% growth)
900
TOP SECTORS 2015 2015 2015 2016 (f) 2017 (f)
800
Agri-Food 2,026 37.9 28.3 9 5
700 Lobsters
Motor Vehicles
600 1,237 23.1 10.1 10 2
Crabs and Parts
500 Forestry 683 12.8 1.6 -4 7
Shrimp
400
Chemicals and Plastics 350 6.5 -7.9 8 6
300 Scallops
All Others 1,054 19.7 -31.3 2 4
200
Halibut
Total 5,350 100.0 1.1 6 4
100
Figure 16: Increasing Importance of Non-Energy Exports Table 20: New Brunswick Merchandise Outlook
100%
% Share of Export Outlook
90% Province's
CAD mn Total Exports (% growth)
80%
TOP SECTORS 2015 2015 2015 2016 (f) 2017 (f)
70%
60% Energy 7,262 59.6 -15.9 -15 13
10%
All Others 807 6.6 13.2 3 4
0%
2012 2013 2014 2015 2016 (f) 2017 (f)
Total 12,184 100.0 -6.3 -6 9
All Other Exports as a % of Total Exports Agri-Food as a % of Total Exports
Total excl. energy 4,922 40.4 12.5 8 5
Forestry as a % of Total Exports Energy as a % of Total Exports
Sources: Statistics Canada, EDC Economics Sources: Statistics Canada, EDC Economics
Figure 17: While Quebec Trade Is Diversifying, Seven US States Still Account Table 21: Quebec Merchandise Outlook
for a Third of Total Exports
100% % Share of Export Outlook
Mexico
Province's
90% South Africa CAD mn Total Exports (% growth)
Connecticut TOP SECTORS 2015 2015 2015 2016 (f) 2017 (f)
80%
Tennessee Metals, Ores and Other
70% 19,996 25.1 2.8 4 4
Pennsylvania Industrial Products
60% Vermont Aircraft and Parts 11,517 14.4 14.0 14 8
50% Ohio
Forestry 9,716 12.2 7.1 4 5
40% Texas
New York Chemical and Plastics 7,955 10.0 9.2 0 5
30%
Asia
20% All Others 30,530 38.3 7.3 5 3
Western Europe
10% Total All Other Countries Total 79,713 100.0 7.2 5 5
Sources: Industry Canada, EDC Economics Sources: Statistics Canada, EDC Economics
Figure 18: Weaker Canadian Dollar and Strong US Demand Boost Ontario Table 22: Ontario Merchandise Outlook
Manufacturing Shipments
% Share of Export Outlook
27 1.10
Province's
CAD mn Total Exports (% growth)
26 1.05
TOP SECTORS 2015 2015 2015 2016 (f) 2017 (f)
25 1.00
Motor Vehicles and Parts 71,301 36.4 14.2 10 1
24 0.95
Billions CAD
Au 012
Fe 011
Ma 2012
Fe 012
Ma 2013
Au 013
Ma 2014
Au 014
No 014
Fe 014
16
No 012
Ma 2015
Au 2015
Fe 015
Au 010
No 011
Fe 010
Fe 013
No 015
No 010
No 013
Ma 2010
20
v-2
g-2
2
v-2
y-2
v-2
y-2
g-2
v-2
g-2
v-2
y-2
g-2
y-2
v-2
g-2
y-
b-
b-
g-
y-
b-
b-
b-
b-
b-
Sources: Haver Analytics, Statistics Canada Sources: Statistics Canada, EDC Economics
Figure 19: Manitobas Top 10 Exports Table 23: Manitoba Merchandise Outlook
Sources: Statistics Canada, EDC Economics Sources: Statistics Canada, EDC Economics
Millions CAD
% Share of Export Outlook
18.0 18.0% Province's
CAD mn Total Exports (% growth)
16.0 16.0%
TOP SECTORS 2015 2015 2015 2016 (f) 2017 (f)
14.0 14.0%
Sources: Industry Canada, EDC Economics Sources: Statistics Canada, EDC Economics
Figure 21: Alberta Rig Count vs. WTI Prices Table 25: Alberta Merchandise Outlook
500 100
Agri-Food 9,893 10.7 3.0 0 2
Figure 22: China, Japan and Five US States Account for Over Half of British Columbias Table 26: British Columbia Merchandise Outlook
Total Exports
100% % Share of Export Outlook
Province's
90% CAD mn Total Exports (% growth)
80% TOP SECTORS 2015 2015 2015 2016 (f) 2017 (f)
China
70% Illinois Forestry 12,779 35.6 3.7 4 7
Sources: Statistics Canada, EDC Economics Sources: Statistics Canada, EDC Economics
The Country Risk Quarterly is published in January, April, July and October.
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