TORONTO – International markets are to blame for Canada’s near-record trade deficit in May, federal Trade Minister Ed Fast said Thursday.
“These are forces outside of government’s control,” he told reporters at an economic conference in Toronto. “They’re global in nature.”
Statistics Canada said Tuesday the trade deficit grew to $3.34 billion in May, up from $3.0 billion in April and one of the largest deficits on record.
The slide in oil prices, which have fallen by nearly half since this time last year, distorts the country’s true economic picture, Fast said.
“If you actually factor out that dramatic drop in the price of energy, our performance is actually very, very sound,” he said.
Statistics Canada data shows energy exports have risen in the last two months, but Fast said higher shipment volumes can’t make up for the continuing slump in oil prices.
As the price of oil has dropped, so too has the value of the Canadian dollar against the greenback. The loonie has fallen from nearly 95 American cents to less than 80 since July 2014, when the price of oil began to slip.
Despite the drop in the dollar, export growth has remained below expectations.
Fast said companies need to invest in capital expenditure, innovation and human resources in order to insure that they remain successful no matter how the currency fluctuates.
“I’m reminding Canadian companies: invest in yourselves,” he said.
In recent days, the government has been confronted with a number of gloomy reports on the economy, including poor GDP figures from Statistics Canada last week that have sparked growing talk of a recession driven by weakness in the mining and energy sectors.
But Fast said he believes that will turn around.
“We fully anticipate that Canada will return to positive economic growth shortly,” Fast said.
The Bank of Canada is set to make its next rate announcement and release its monetary policy report next Wednesday.
The central bank is widely expected to cut its economic outlook, but what happens with its key interest rate is less certain. Some observers say they believe governor Stephen Poloz will cut the overnight lending rate of 0.75 per cent to 0.5 per cent.