World economic growth is in full take-off and will reach cruising altitude by the middle of next year, according to the latest global export forecast released by Export Development Canada. EDC forecasts global growth to average 2.6% this year and 3.6% next year.

Canada’s economy is expected to grow by 2.5% this year supported by a 2 % increase in export sales, making up for last year’s declines. Export sales should be even stronger next year, growing by close to 9% as the Canadian economy is forecast to expand by 4%. The rebound in the first half of this year will give way to slower growth in the second half as the initial inventory rebuild is completed. Job creation, particularly in the United States, will lag the recovery and there will be intense pricing competition in the global manufacturing sector.

The potential for financial volatility will be high given the lingering stresses due to last year’s slowdown. Interest rates will increase and the U.S. dollar will decline against most other currencies, including the Canadian dollar which should rise to around the US 70-cent level over the next 12 to 18 months. The improving economy and large production cutbacks in the resource sector mean global commodity prices should continue to firm up and EDC is forecasting further improvement over the next 12 to 18 months.

EDC is also forecasting the following sector outlooks:
– Global telecommunications should emerge from the “tech wreck” storm to post modest growth this year. Canadian telecom exports should bottom out late this year and return to positive growth of 5% next year. Telecom equipment, computers and parts will be the most improved growth performers next year as the investment climate turns more positive.
– Canadian aerospace exporters should continue to see double-digit growth in sales this year and next, even though the sector will be a significant under-performer at the global level. Most of the weakness will be concentrated in the large aircraft sector.
– Continued weakness is forecast for the global automotive sector this year and it will be 2003 before the sector returns to steady growth. Canadian exporters of automotive products can expect another decline this year, but should see exports rise by about 4% next year once the economy fully recovers.
– Canadian energy exports are expected to fall by 3% this year, but to rise by 12% in 2003. Although sales volumes will continue to grow, gas prices will be lower this year, on average, while oil prices will trend slightly higher. Spare capacity among OPEC producers should limit any near-term spikes in the price of oil.
– Forestry exports are expected to drop by 3% this year, but a stronger global economy will contribute to 9% growth next year.
– Agri-food export sales will see above average growth this year and nextas a combination of supply shortages and improving demand boosts prices for many products.

Provincially, growth will be led by the major agri-food producers, PEI and Manitoba, says EDC. Newfoundland and Labrador will also post strong growth as new energy production capacity comes on stream. Most of the other provinces will see soft growth, either because of lingering weakness in auto or telecom
exports or, in the case of BC, forestry exports.