Future Prospects for the Canadian Economy Suggest More Asian Focus
Guest post by Forex Traders
The Great Recession, as it has been so named, has been extremely difficult for most countries with well-developed economies. Various recovery programs have failed to stimulate the domestic growth and hiring necessary to replace and exceed those jobs lost during the recent downturn. Australia seems to be the only outlier that was able to skirt the global recession, due primarily to its proximity to Asian markets and its export trade of raw materials to China’s fast-growing industrial complex.
Canada, however, has already outdistanced its other G7 brethren in newly gendered economic performance, including generating enough jobs to replace the 460,000 that were previously lost. To the South, the United States continues to stumble along, mired in political gridlock with tepid recovery results, still wondering when the nine million job lost figure will ever be diminished. Canada’s recovery is ongoing, and economic activity is well past pre-recession levels.
Canada’s recovery began in earnest in 2010, jumping ahead with 6.2% GDP growth for the first quarter, more than three times the average of 1.9% for the other G7 countries combined. However, by the end of the year, the annualized growth figure had leveled off at 3%, roughly the same as the U.S. The reason cited for the decline in domestic growth during the balance of 2010 was weak export trade.
The U.S. does account for 80% of Canadian exports, and, without a full recovery south of the border, export demand suffered. The USD CAD currency pair tells the story. The Canadian Dollar has blown past parity with the greenback in 2011 and continues to appreciate, a positive trend that currency trading enthusiasts have kept a close eye on.
It takes time to develop more export avenues on the global stage, but the prospects for the future will come from the west, not south as in the past. The IMF, as well as many other leading economic research groups, is projecting the growth trends in Asia, especially in China and India, to continue for the next two decades. Years of corporate off shoring have relocated the manufacturing center of the planet to China. India and others have followed suit, resulting in the largest redistribution of wealth that the world has ever experienced.
Prospering middle classes in Asia are also desirous of the Western lifestyle, complete with better homes, cars, clothing, and food. Although their national economies are currently driven by exports, both China and India will evolve to a more consumer-driven environment over time. CEO’s for nearly every major multinational company have often noted in recent quarterly reports that their future prospects will come from servicing demand for their many products and services in these burgeoning markets.
Canada has already benefited from China’s unquenchable need for energy imports, but other opportunities will abound as well. Forecasting growth and demand from Asia may be difficult, but well-established trends will create future export demand. Consequently, Canada can already forecast GDP growth in 2011 in the two to three percent range.
