Strategy

The CEO Poll: Dangers ahead

Canadian business leaders wary on the economy.

Business leaders give the federal mini-budget high marks.

Canada’s economy might be strong today, but numerous factors will threaten its health this year. In a web poll conducted by COMPAS Inc., Canadian CEOs expressed concern that our country’s prosperity could be dragged down by the increasing difficulty of borrowing capital, and by a weakening U.S. economy.

Nearly 70% of the 131 respondents described the current Canadian economy as “excellent” or “good.” That’s down 21 percentage points from when they were asked the same question in mid-2006. The respondents were divided on how the economy will fare over the next six months, however. Only 6% said the economy would improve, while the rest were split evenly on whether it would be about the same, or become somewhat worse.

Of course, the picture is different across Canada. “Western Canada is in much better financial condition than Ontario or Quebec,” wrote one respondent. “We are living in an oil economy rather than the manufacturing one that has sustained us for many years.” Inflation was not an issue for the CEOs. In 2007, the inflation rate was approximately 2.5%, and the respondents expected only a modest increase in the rate to 2.7% this year.

Other concerns centred on borrowing, with 58% of the respondents saying it will be more difficult this year as a result of the global credit crunch. The softening U.S. economy is another worry. More than 60% of the business leaders felt the weakening financial situation down south would have a modest impact on Canada, while 34% said the effect would be substantial.

“If U.S. consumers stop buying, the knock on us will be significant,” wrote one respondent. Another laid blame on Ottawa for not adequately addressing the country’s pending economic woes: “Unfortunately, neither federal nor provincial authorities seem to understand the gravity of the situation, or at least [have] any desire to provide serious rescue remedies.”

One CEO said the worries are misplaced: “If the monetary situation is well controlled, damage to the economy will only be moderate. Global warming is much more dangerous.”