Canada’s exports will remain hobbled by a sluggish world economy until the latter half of 2010, according to Export Development Canada’s summer Global Export Forecast.

“The good news is that global commerce is actually working off the excesses that had built up in recent years,” said Peter Hall, vice president and chief economist at EDC. “Unfortunately, the pile was so high that we still have a way to go before balance is restored in the latter part of next year.”

As EDC previously forecasted, Canadian exports will tumble by 21% in 2009 and activity levels will remain low in 2010, as growth will be a relatively meager 6.6%.

World output has again been revised downward. The global economy is now forecast to contract by 1.7% in 2009, followed by modest 2.7% growth in 2010. EDC’s spring 2009 forecast had predicted a 1.3% contraction in 2009, followed by 2.3% growth in 2010.

Driving the contraction in exports are plummeting export prices and sharply weaker physical shipments. Commodities will see the biggest drop in export sales, with energy, fertilizers and base metals sustaining an average decline of 38%. The auto sector will repeat the 2008 decline of 22%, reflecting the collapse in demand in the U.S. and the restructuring underway in the sector. The forestry industry will continue its decline of recent years, with a further 14% drop as pulp and lumber shipments falter.

“Exporters will be partly shielded by a weak Canadian dollar which we forecast to hover in the US83¢-US85¢ cent zone over the next 18 months,” said Hall. “But true recovery will not come until 2011.”

The global economy was weakened by the collapse of the U.S. housing market in the middle of 2006. The housing market crash spilled into financial markets and, by the fall of 2008, had pushed many financial institutions to the brink, constraining credit worldwide. A drop in global demand is still underway, compounded by mounting unemployment, which will further strain the financial sector.