Reuters: Regulatory News: UPDATE 1-Don't blame Canada's export woes on strong C$ - BoC

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UPDATE 1-Don't blame Canada's export woes on strong C$ - BoC Aug 22nd 2012, 15:04 Wed Aug 22, 2012 11:04am EDT * Export woes caused by weak markets, not strong C$ - Carney * "We cannot devalue ourselves to prosperity," says Carney TORONTO, Aug 22 (Reuters) - The strong Canadian dollar is not the main cause of the problems faced by exporters and Canada cannot devalue itself to prosperity, Bank of Canada Governor Mark Carney said on Wednesday. Speaking to the Canadian Autoworkers Union in Toronto, Carney noted that Canada's export performance over the last decade has been the second worst in the G20 grouping of major and emerging nations. "Some blame this on the persistent strength of the Canadian dollar. While there is some truth in that, it is not the most important reason," he said, describing over-exposure to the mature and sluggish U.S. market as a more important factor. "Net, our strong currency explains only about 20 percent of our poor export performance." Carney added: "We cannot devalue ourselves to prosperity or cut ourselves off from the world and hope to rely on ever-increasing borrowing by Canadian consumers." The CAW been a tough critic of the strong Canadian dollar, arguing that it inflates the cost of making cars in Canada. The union launches talks with the Big Three Detroit car companies later this year and will be seeking a share in the firms' newfound profitability. Carney said weak foreign demand and challenges such as the strong dollar mean exports are likely to remain below their pre-recession peak until the start of 2014. He said Canada should focus on exporting to faster-growing emerging nations, while firms needed to improve the skills of workers and take advantage of new technology. Near-record low interest rates have persuaded Canadians to borrow heavily against the value of their property, driving borrowing to record levels, and Carney noted that there were signs of overbuilding and overvaluation in some parts of the real estate market. Repeating language the Bank used last month when it kept interest rates unchanged, Carney said "some modest withdrawal of the present considerable monetary policy stimulus" might become appropriate. Carney has taken a more hawkish line than most central bankers, noting the Canadian economy's underlying momentum was roughly in line with the potential that it has to grow. Link this Share this Digg this Email Reprints

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