© Paul Ferley
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Traditionally, small and medium enterprises have not been as active in terms of exporting; however, the potential exists. Thus, I think the hope is that with the agreement coming into force, it will provide incentive for small and medium enterprises to start looking at potentially becoming more of an exporter rather than just supplying the domestic market.
Meanwhile, on the European side of the equation, it is often the case that larger firms do most of the exporting. Still, we have seen a number of occasions where smaller firms have managed to become active exporters. I believe that what is happening in Canada is that they are trying to encourage those SMEs to become more involved in exporting to markets outside of Canada.
Analysts suggest that the Canada Pension Plan will hurt the economy badly, as it is not strong enough. Do you share this point of view or not? Why?
In my understanding, the CPP is fairly well funded, probably even better than a lot of other public pension plans among industrialized economies. A couple of decades ago they revamped funding of the CPP and with those changes they now stand on more secure financial ground; therefore, I do not share this point of view.
What will be the major drivers for the Loonie this year and what are your forecasts for EUR/CAD and USD/CAD by the end of this year?
The main drivers in terms of the Canadian Dollar will be the trajectory of oil prices, which we see gradually strengthening through the forecasts, with WTI benchmark soaring to around $56 per barrel in 2017, which is up from slightly below $50 at the moment.
Offsetting that, we are expecting the Federal Reserve to start tightening policy possibly as early as December this year and further in 2017. In contrast, the Bank of Canada is expected to hold interest rates steady. Hence, we are anticipating the Canadian Dollar to essentially hold pretty steady at around the current level, seeing the Loonie at 1.33 against the US Dollar at the end of this year.
With respect to the Euro, we see the Canadian Dollar managing to strengthen modestly thanks to the rise in oil prices; therefore, our forecast for the EUR/CAD currency pair stands at 1.40 by the end of the next year.