The processing facility at the Suncor tar sands operations near Fort McMurray, Alberta, is seen in an undated file photo taken September 17, 2014. There is no doubt oil’s decline has negatively affected Canada, but not all sectors and geographies are affected equallyTODD KOROL/Reuters
The optimism of Canada's C-Suite executives may be falling right along with oil prices – but while business leaders have low expectations for the Canadian economy over the next 12 months, there remains a glimmer of hope: projections for their own companies' prospects.
We are all seeing the impact of the drop in oil prices not only on the Alberta economy but on our national economy. Energy companies continue to shrink capital expenditure budgets, investments and work forces. The ripple effect of the downturn has had an undeniable effect on suppliers to the sector, real estate values, consumer confidence and more.
C-Suite confidence in the economy is also clearly shaken. In this quarter's C-Suite survey, only 60 per cent of the executives interviewed believe the Canadian economy will grow at all over the next year, a stark contrast to 77 per cent in December. Their sentiments also reflect the projections of the OECD, which recently slashed its prediction of Canadian economic growth in 2015 to 2.2 per cent.
Interestingly, when asked about their own businesses, the vast majority of respondents believe their companies will experience moderate or strong growth in the months ahead. And while the consensus is that low oil prices will have a net negative impact on the Canadian economy overall, most say their businesses would be immune to the effects – and possibly even benefit from them.
While the current economy is clearly challenging, smart organizations are using this time to improve productivity, strengthen operations, and develop new efficiencies and strategies for growth.
The lower dollar, combined with a growing U.S. economy, provides significant new growth opportunities. Over 75 per cent of survey respondents believe a lower dollar will have some positive effect on the economy. Manufacturers and exporters are the most obvious beneficiaries of this perfect storm, and companies looking to grow south of the border should now think about how they can take advantage of the current conditions and rising U.S. demand.
There is no doubt the decline in oil prices has negatively affected our economy, but this survey reminds us that not all sectors and geographies are affected equally. For many, now is the time to identify and eliminate inefficiencies, differentiate themselves from their competitors, open new markets and reposition so they're prepared to take advantage when the economy inevitably picks up again.
Rob Brouwer is Canadian managing partner, clients and markets, at KPMG