OTTAWA—The Canadian economy may be reaching the limits of its growth potential in the long term unless there’s radical change, Bank of Canada governor Mark Carney says.
A speech prepared for a Kitchener-Waterloo business audience outlined reasons for optimism in recent global developments.
Europe is no longer in crisis, he said, although it is not out of the woods. The region’s debt challenges have moved from “the acute to the chronic,” while the U.S. has begun growing slowly.
“The considerable external headwinds have abated somewhat,” Carney said in notes from the speech released in Ottawa.
But it’s the longer-term that concerns Carney, who warns that Canada’s economy can’t continue depending on consumer spending and trade with the U.S.
Exports—the other major engine of growth in Canada—have fallen behind mostly because Canada has hitched its wagon to the wrong markets: Europe and the U.S.
As a result, exports remain eight per cent below pre-recession levels, even as the overall economy has totally recovered.
Canada may call itself an exporting nation, but its exporting badly, according to Carney who cites that since 2001:
– Canada has the second worst export performance in the G20 group of nations
– As a part of the total global export market, Canada has gone from a share of 4.5 per cent to about 2.5 per cent
– Our exports of manufactured goods have been cut in half
– Employment in the factory sector has lost nearly 500,000 jobs.
This alarming message underscores the reason the Harper government has made trade— particularly to China, India, Brazil and other emerging powers—a key priority in its economic agenda.
Carney’s prescription, as he has previously urged, is for businesses to shift their focus to where growth is, and to start investing in innovation to improve their productivity in order to compete.
He notes that since the recession, emerging markets have accounting for two-thirds of global growth and one-half of import growth, a trend expected to continue for decades.