Business & Policy
Lower oil prices having significant impact on exports from Western Canada: EDC
CALGARY, Nov. 5, 2015 /CNW/ - Alberta and Saskatchewan will have lower exports this year due to depressed oil prices but will rebound in 2016 through a partial price recovery and volume gains, according to a new global export forecast released by Export Development Canada (EDC). Manitoba will also see declines in its energy exports in 2015, but gains in other important sectors will offset that and give it a modest increase in overall exports. All three provinces will enjoy export growth in 2016.
According to the Global Export Forecast Fall 2015, Alberta's overall exports will slump 23 per cent in 2015, due to a 30 per cent drop in exports of energy, which accounts for more than three-quarters of the province's exports. Saskatchewan, which relies on energy for about 40 per cent of its exports, will also see a significant decline – 43 per cent – in that sector, but strong growth in exports of fertilizers and agri-food will greatly moderate the effects on its overall export performance. Manitoba's energy exports will be down 24 per cent this year, but as energy is a much smaller share of exports than in the other two provinces, the effect on its overall exports is much less.
"There's no question that low oil prices are having a major impact on exports from Western Canada, especially Alberta," said Peter Hall, Chief Economist at EDC. "But Saskatchewan and Manitoba are showing how provinces with a more diversified range of exports can soften the blow caused by declines in one sector."
EDC says Saskatchewan's agri-food exports, which roughly equal the value of its energy exports, are set to rise 10 per cent in 2015, while fertilizer exports will increase by 38 per cent. In Manitoba, the greatest positive contribution to its exports will come from shipments of pharmaceutical products, along with gains from manufacturers such as New Flyer Industries which is providing coach buses to several U.S. state governments. Alberta's non-energy exports are also seeing a slight increase – 1 per cent – in 2015 and will post a further 4 per cent gain in 2016.
"Manitoba and Saskatchewan are also more diversified than Alberta in the markets they sell into," said Hall. "While the United States accounts for more than 90 per cent of Alberta's exports, it's only about two-thirds of the market for the other two."
A rebound in energy exports in all three provinces next year will also help them raise their overall exports. Alberta will see a 20 per cent increase in energy exports and a 15 per cent increase in overall exports; Manitoba's energy exports will climb 15 per cent and overall exports by 6 per cent; and Saskatchewan will enjoy a 13 per cent increase in energy exports and a 5 per cent jump in overall exports.
EDC is Canada's leading provider of small business financing and insurance for companies with sales or business outside of Canada. Some of its services include the Export Guarantee Program to help exporters access more financing, Foreign Exchange Facility Guarantee to help exporters manage foreign exchange risk, and Political Risk Insurance that can cover up to 90 per cent of losses from political risks in foreign markets.
EDC's economics team includes some of Canada's leading trade experts, who share their knowledge freely with Canadian companies looking to grow their international sales and help them manage the associated market risks. Its semi-annual Global Economic Forecast addresses the latest global export conditions, including providing perspectives on leading economic trends and export strategies to help Canadian companies of all sizes maximize their export growth. The forecast also analyzes a range of risks for which exporters should be prepared.
Visit the Global Export Forecast: Fall 2015 page for the full report.