On November 23, 2020, we had the pleasure of welcoming back Peter Hall, VP and Chief Economist with Export Development Canada, to discuss the shape of our economic recovery over the past six months. Peter offered a sector-by-sector look at where we are and EDC’s 2021 predictions for Canada.
As necessity is the mother of invention, crisis is the mother of transformation.
Recovery is on track, but uneven
With retails sales (which count for 60% of GDP) back to pre-pandemic levels, high levels of demand deposits, and an explosive savings rate in Canada, Western Europe and US, the overall outlook for continued recovery is positive. Recovery is occurring, but highly variable across sectors. When we break out sales and trade index by industry, we can see which industries are thriving and which are still recovering.
Trade: Canada’s growth story
As a whole, exports are a veritable good-news story across the globe, where China’s exports are now above pre-pandemic levels, and Canada is at 96%. For the auto sector, a drastic dip in exports in April 2020 has since recovered, and is now performing better than January 2020. Food exports, however, never decreased and are performing at an average of 120% compared to January 2020. Other industries, such as aerospace and energy are still lagging and service exports is experiencing the “dreaded L” shape, where the negative impact of the pandemic is still apparent. With a weaker domestic economy, Canadian growth will result from trade and we must look abroad, beyond the US border.
More virtual activity, mechanization and “glocalization”
In general, investments are on hold however COVID has fast-tracked our interest and need for technology which, along with persistent labour shortages and a growing interest in capital intensity, could lead to large scale industrial transformation coming out of the pandemic. In order to address our supply chain risks, Peter spoke to the need to create redundancies in our system by transforming trade through re-shoring, near-shoring and “glocalization”. As the world sets up to re-mechanize Peter suggests this could ultimately benefit Canada which has traditionally lost out on investment due to higher labour costs. The establishment of local supply hubs in Asia, North America and the EU, which prioritize resiliency over cost, gives Canada an opportunity to compete with lower cost markets – even if the consumer has to pay a little more.
Resilience of the Canadian economy
Peter believes we should prepare for aggressive growth. While Canada’s forecasted GDP for 2020 will likely decrease by 5.8%, EDC expects an increase of 5.7% in 2021 (compared to 2019’s increase of 1.7%). On the whole, our economic future looks quite bright, however with different industries experiencing different conditions, it’s critical to recognize the importance of containing the pandemic, and the need to move forward strategically is ever-more apparent.
MORE ABOUT PETER
Peter G. Hall, Vice-President and Chief Economist, Export Development Canada
Peter Hall joined Export Development Canada (EDC) in November 2004. With over 30 years of experience in economic analysis and forecasting, Mr. Hall is responsible for overseeing EDC’s economic analysis, country risk assessment and corporate research groups. In addition to preparing strategic advice for senior management at EDC, Mr. Hall is a featured speaker at conferences, international roundtables and policy fora, and regularly appears in television, radio and print media commenting on the world economy and Canadian international trade issues. He produces a widely circulated print and video weekly commentary covering an eclectic range of current global economic issues.
Prior to joining EDC, Mr. Hall directed the economic forecasting activities of the Conference Board of Canada. Mr. Hall has served as president of both the Canadian Association for Business Economics, a 600-member national association of professional economists, and its largest local chapter, the Ottawa Economics Association. He has also been a volunteer board and committee member for two Ottawa area private schools. Mr. Hall has degrees in economics from both Carleton University and the University of Toronto.