Canada: Business outlook. Check it out:
(EIU Viewswire Via Thomson Dialog NewsEdge) COUNTRY VIEW
FROM THE ECONOMIST INTELLIGENCE UNIT
Business environment rankings(a)Value of index(b)Global rank(c)Regional rank(d)2001-052006-102001-052006-102001-052006-10Overall position8.638.752211Political environment7.98.3171352Political stability7.88.5261453Political effectiveness8.18.1131545Macroeconomic environment9.29.21511Market opportunities7.78.05422Policy towards private enterprise & competition9.09.04433Policy towards foreign investment8.78.791022Foreign trade & exchange controls9.610.02121Taxes8.18.111911Financing9.39.3101344The labour market7.77.67832Infrastructure9.39.45322(a) See Guide to the business rankings model at the end of this report. (b) Out of 10. (c) Out of 82 countries. (d) Out of 7 countries: Canada, France, Germany, Italy, Japan, the UK and US.The Economist Intelligence Units business rankings model seeks to measure the quality of the business environment and its key components for each of the 82 countries covered by Country Forecasts. The quantitative assessment (on a scale of 1 to 10) of the business environmentthe opportunities for, and the hindrances to, the conduct of businessenables the ranking of a country on its overall position and in each of the ten component categories, on both a global and regional basis (see the methodological notes at the end of this report). The assessment is made for the five-year forecast period (2006-10) as well as for the previous five years (2001-05).
Canada remains in second place in the global rankings in 2006-10
Canada remains in second place, after Denmark, as the most attractive business location in the world in the forecast period (2006-10). This is despite a significant decline in Canadas ranking for macroeconomic environment and smaller declines in rankings for policy towards foreign investment, financing and the labour market. This setback was offset by a major improvement in the ranking for political stability, which bumped up the ranking for political environment, and minor improvements in the rankings for market opportunities, foreign trade and exchange controls and infrastructure.
Currency volatility will continue
The macroeconomic picture has been clouded by an increase in currency volatility. Since the beginning of 2003 the Canadian dollar has appreciated by about 40% against the US currency. This sharp increase has mainly been caused by strong global demand for Canadian goods, particularly commodities, and weakness in the US currency. Since most Canadian trade is done with the US, this appreciation has adversely affected exporters of resources and manufactured goods. Resource exporters have been partly insulated from the currency effect by high global commodity prices. The manufacturing sector, especially companies located in the industrial heartland of Ontario, has been hard hit. An expected slowdown in the US will exacerbate manufacturers troubles. We expect the Canadian currency to remain strong against the US dollar for most of the forecast period, as commodity prices remain high and foreign direct investment (FDI) continues to flow into Canada. It will weaken later on in the forecast period, but this will provide little relief to Canada's beleaguered manufacturing industry.
The main reasons for the gain in political stability were improvements in the categories of social unrest and change of government. The federal election in January 2006 produced a change in government from Liberal minority to Conservative minority. Another election is due within the forecast period, which we expect the Conservatives to win and perhaps even gain a majority of seats. Separatist sentiment in the French-speaking province of Quebec waxes and wanes but currently is at a low point, reducing the prospect of social unrest. There is, however, a number of land disputes with aboriginal Canadians that have flared up in recent months. The new government has yet to set forth an aboriginal policy. Depending on how it handles this important brief, there could be renewed conflict during the forecast period.
Copyright 2006 Economist Intelligence Unit
Technorati
Del.icio.us
Slashdot
Digg
