Canada’s GDP growth is forecast to accelerate modestly from 2.0% to 2.1% in 2014, with the rebalancing toward exports and investment potentially more subtle than expected. Our 2014 forecast of 5.1% is below the consensus of 5.8%. Growth in consumer spending is forecast to decelerate from 2.4% to 2.2% in 2014 as households continue to deleverage. A rebound in investment in H2 won’t be enough to counteract the 3.9% annualised decline in Q1, implying little growth contribution from investment this year.

Top Five Hotlist Export Destinations
Rank 2013 2030
2 China China
4 Japan Japan
5 Mexico Mexico
  • The number of firms expecting trade volumes to rise in the next six months has declined slightly, although remains above its survey history average.
  • Petroleum products will contribute the largest share – nearly 50% – to Canada’s increase in exports in 2014-16.
  • Both the US and Asia are expected to offer the best trade opportunities over the next six months.

Current trade position

The Bank of Canada has noted that the recovery in world trade has been disappointing, indicating that the rise in Canadian exports will be more gradual than previously expected. Export volumes are forecast to expand at a 2.3% pace this year and accelerate to 5.1% in 2015. Import volumes are forecast to contract by 0.3% in 2014 but rebound to 3.1% next year.

Spotlight: Energy

Why Energy is important

Resource extraction is a key sector for the Canadian economy. World oil demand and oil prices are seen rising in 2015, supporting the country’s overall economic performance.

Trade in Energy goods for Canada (2014-30)

Simon Cooper, Chief Executive of HSBC Commercial Banking.

“Businesses can’t afford to fixate on the risks posed by today’s geopolitical problems and uneven rates of growth at the expense of their future planning. Conditions have undoubtedly been tough for trade recently, but we are now turning a corner. The medium and long term prospects look significantly better for businesses that have prepared themselves for recovery in both developed and developing markets.”

Key findings

  • Canada’s domestic production of fossil fuels will continue to outpace domestic demand. This means that Canada has ample potential to ramp up its energy exports beyond its current key US market. Infrastructure capacity remains a primary constraint on Canada’s ability to do so.
  • Petroleum products will contribute a nearly 50% share to the increase in exports in 2014-16, but in 2017-20 its share is forecast to drop below 20%. This trend reflects Canada’s trade geography and pipeline bottlenecks.
  • However, ongoing and planned pipeline projects have the possibility to address this challenge. If Canada can install the necessary infrastructure, it will be well placed to become a global exporter of oil and LNG, rather than one overwhelmingly focused on the US.

Short-term snapshot


Trade volumes are seen rising in the short run by 58% of survey respondents, the same as six months ago, but this is still above the average over the survey’s history. 10% of survey respondents expect a decline in trade volumes, broadly in line with the 9% average. The number of respondents expecting no change has dropped to 32%, below the long-run  average.

HSBC Trade Confidence Index

The Trade Confidence Index has declined to 112 from 115 six months ago, in line with the average over the past four years. However, it remains well above the 100 neutral mark, indicating that the outlook for trade is improving. 

HSBC Trade Confidence Index

Cross-border business

Survey respondents expect better trade opportunities in both the US and Asian markets. The number of firms identifying North America as offering the best opportunity for business growth over the next 6 months has risen from 52% to 54%. The number of firms specifying Asia for the same metric has increased from 23% to 24%.

Regional export flows

Corridors of choice

  • Perceptions about the global economic outlook have softened somewhat. The number of firms expecting the global economy to grow has declined from 63% to 61%, with more firms now expecting it to maintain the same level.
  • The US is strategically important for Canada’s trade position, identified as the primary trade partner by 76% of survey respondents. Asia, and particularly China, is next in importance, with 18% and 12%, respectively.
  • Fluctuating exchange rate conditions were cited by over 60% of all firms as the top barrier to export and import business. Costs of essential services such as shipping, logistics and storage were a primary barrier for 44% of survey respondents.

Opportunities for business

The importance of trade ties with the US means that the recovery in the US economy will provide a boost to Canadian exports over the next few years. Over the medium term, Canadian exporters will seek to gradually diversify their markets, however, as growth in Emerging Market economies outpaces that of the US economy.

Longer-Term Outlook

Expectations for the global economy

Increased growth momentum in the US should lift Canada’s exports, especially of fuels, in the short run. In the medium term, Canada’s exposure to fast growing emerging markets that will lead the growth in global energy demand remains constrained. Ongoing and planned oil pipeline projects, as well as new investment in LNG capacity, have strong potential to overcome this geographic constraint.

Corridors to watch

Canada’s main trading partners have historically been slower-growing advanced economies, Europe and the US. The recent weakening of Canada’s world export share has lead firms to begin diversifying their trade routes toward Mexico and broader Asia.

The fastest-growing markets for Canadian exports in 2014-16 are expected to be Mexico, Korea, and China. By 2017-20, China will take the lead, followed by India, Brazil, and Indonesia. The fastest growing source markets for Canada’s imports in 2014-16 will be Mexico, Turkey, and the UK. By 2017, imports from India, Turkey, and China will show the strongest growth.

At the sector level, petroleum products are forecast to be the main driver of exports in 2014-20. Transport equipment and industrial machinery will also be important contributors to the growth in Canada’s exports. By 2021-30, current projections indicate that transport equipment may well overtake petroleum products.

Canada’s projected sector contribution increase in merchandise exports

Focus on Energy

  • Oil production is an important industry in Canada, which is currently ranked as the 6th largest oil producer in the world. According to the Canadian Association of Petroleum Producers, the country’s oil production will increase steadily at an average annual rate of 175,000 barrels per day out to 2030 as it continues to develop the oil sands.
  • Currently, 97% of Canada’s oil exports go to the US. Petroleum exports to the US are expected to grow by 7% a year in 2014-16, with growth moderating to just above 5% a year further out. This pace is slower than that forecast for other regions such as Asia and Europe, however, indicating some ongoing diversification of export markets.
  • Europe will also see stronger growth of energy imports from Canada, although the region still accounts for a relatively small share of Canada’s total energy exports. For example, petroleum exports to the UK are forecast to grow by 11% a year in 2014-16 and by 9% a year over the medium term, but the UK will still account for less than 1% of Canada’s total petroleum exports even in 2030.


Canada’s domestic energy demand is set to grow at a slower pace than forecast energy production. This will result in greater availability of energy output for export. Given the geographic trends in energy demand and trade, Canadian firms will need to expand and diversify their energy export strategies if Canada is to remain a key player in the global energy market.

About the HSBC Trade Forecast – Modelled by Oxford Economics

Oxford Economics has tailored a unique service for HSBC which forecasts bilateral trade for total exports/imports of goods, based on HSBC’s own analysis and forecasts of the world economy to generate a full bilateral set of trade flows for total imports and exports of goods, and balances between 180 pairs of countries. Oxford Economics produces a global report for HSBC, as well as country specific reports on the following 23 countries: Hong Kong, China, Australia, Indonesia, Malaysia, India, Singapore, Vietnam, Bangladesh, Canada, USA, Brazil, Mexico, Argentina, UK, France, Turkey, Germany, Poland, Ireland, UAE, Saudi Arabia, and Egypt. The analysis also includes trade with Japan and Korea for a total sample of 25 key trading nations.

Oxford Economics employs a global modelling framework that ensures full consistency between all economies, in part driven by trade linkages. The forecasts take into account factors such as the rate of demand growth in the destination market and the exporter’s competitiveness. Exports, imports and trade balances are identified, with both historical estimates and forecasts for the periods 2014-16, 2017-20 and 2021-30. Sectors are classified according to the UN’s Standard International Trade Classifications (SITC) system at the two-digit level and grouped into 30 sector headings. More information about the sector modelling can be found on

About the HSBC Trade Confidence Index:

The HSBC Trade Confidence Index is conducted by TNS on behalf of HSBC in a total of 23 markets, and is the largest trade confidence survey globally. The current survey comprises six- month views of 5,200 exporters, importers and traders from small and mid-market enterprises on: trade volume, buyer and supplier risks, the need for trade finance, access to trade finance and the impact of foreign exchange on their businesses. The fieldwork for the current wave (11) was conducted between May - July 2014 and gauges sentiment and expectations on trade activity and business growth in the next six months.

Sector Focus – Methodology

This report also includes special sections on key industries – agriculture, energy, metals, pharmaceuticals, technology and textiles. Based on the same underlying forecasts used for the existing analysis of trends in bilateral trade flows, the report examines how exports/imports of these groups of products are expected to evolve over time. The definitions used in the report for each of these sectors are below:


·Live animals (SITC code 00)

·Meat and meat preparations (SITC code 01)

·Dairy products and birds' eggs (SITC code 02)

·Fish, crustaceans, molluscs (SITC code 03)

·Cereals and cereal preparations (SITC code 04)

·Vegetables and fruit (SITC code 05)

·Sugars, sugar preparations and honey (SITC code 06)

·Coffee, tea, cocoa, spices (SITC code 07)

·Feeding stuff for animals (SITC code 08)

·Other edible products (SITC code 09)

·Beverages (SITC code 11)

·Tobacco (SITC code 12)


·Coal, coke and briquettes (SITC code 32)

·Petroleum and petroleum products (SITC code 33)

·Gas, natural and manufactured (SITC code 34)

·Electric current (SITC code 35)


·Metalliferous ores and metal scrap (SITC code 28)

·Iron and steel (SITC code 67)

·Non-ferrous metals (SITC code 68)

·Other manufactures of metals (SITC code 69)


·Medicinal and pharmaceutical products (SITC code 54)


·Office machines and automatic data-processing machines (SITC code 75)

·Telecommunications equipment (SITC code 76).

·Electrical machinery and appliances (SITC code 77)

·Professional, scientific and controlling instruments and apparatus (SITC code 87)

·Photographic apparatus and optical goods (SITC code 88)

Textiles and Garments

·Textile fibres (SITC code 26)

·Textile yarn, fabrics, made-up articles (SITC code 65)

·Travel goods, handbags and similar containers (SITC code 83)

·Articles of apparel and clothing accessories  (SITC code 84)

·Footwear (SITC code 85)


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