Freight Transport Trends & Forecasts to 2015
March 2000. Forecast update is available on request.


EXECUTIVE SUMMARY

The objective of this forecast study is to develop estimates of 1999 modal[1] freight traffic and produce traffic forecasts for the years 2000 to 2010 inclusive, with long-term outlooks for the year 2015. The approach used visualizes the Canadian transportation system as a complex network of transportation nodes, routes and modes competing for commodities flowing within Canada and between various North American and overseas supply and demand centres. The amount/size and direction of commodities flowing through this network are influenced by a multitude of interrelated economic, infrastructure/technological, political, institutional and environmental factors at domestic and global levels. By identifying the supply and demand centre(s) for each commodity/group and then determining the impact of these factors on its supply, demand, trade and modal choice, the accuracy of the forecast is greatly enhanced

Total modal freight traffic[2] in 1999 is estimated at 863 Mt, 2.0% above the 846 Mt in 1998. During the 1999-2015 forecast period total freight traffic is expected to increase at an average annual rate of 1.3% to 1,050 Mt in 2015.

 
 

 

The marine traffic in 1999 is estimated at 330 Mt, 0.7% above the 328 Mt in 1998. During the 1999-2015 forecast period total marine freight traffic flows are expected to increase at an average annual rate of 1.0% to 389 Mt in 2015.

The rail traffic in 1999 is estimated at 289 Mt, 1.5% higher than the 285 Mt in 1998. During the 1999-2015 forecast period total rail freight traffic flows are expected to increase at an average annual rate of 1.1% to 341 Mt in 2015.

The trucking traffic[3] in 1999 is estimated at 244 Mt, 4.4% above the 234 Mt in 1998. During the 1999-2015 forecast period total trucking freight traffic flows are expected to increase at an average annual rate of 1.9% to 320 Mt in 2015.

In terms of share of total freight traffic, the trucking sector is expected to increase from 27.6% in 1998 to 30.5% in year 2015. Shares of the overall freight traffic by marine and rail should decline from 38.7% and 33.6% in 1998 to 37.0% and 32.5% respectively by the year 2015.

FREIGHT TRAFFIC BY MODE: ACTUAL & FORECAST

 

Mt

APC

% Share

 

 

Marine

Rail

Trucking

Modal

Marine

Rail

Trucking

Modal

Marine

Rail

Trucking

Modal

1997

294.6

258.4

194.3

747

 

 

 

 

39.4

34.6

26.0

100.0

1988

320.0

264.7

208.4

793

8.6

2.5

7.3

6.1

40.3

33.4

26.3

100.0

1989

301.3

249.5

189.6

740

-5.8

-5.7

-9.0

-6.6

40.7

33.7

25.6

100.0

1990

292.7

242.3

174.2

709

-2.8

-2.9

-8.1

-4.2

41.3

34.2

24.6

100.0

1991

292.0

247.4

150.6

690

-0.2

2.1

-13.6

-2.7

42.3

35.9

21.8

100.0

1992

275.4

241.6

149.5

667

-5.7

-2.3

-0.7

-3.4

41.3

36.2

22.4

100.0

1993

274.1

240.7

173.4

688

-0.5

-0.4

16.0

3.3

39.8

35.0

25.2

100.0

1994

299.2

273.2

195.7

768

9.2

13.5

12.9

11.6

39.0

35.6

25.5

100.0

1995

310.5

275.2

210.9

797

3.7

0.7

7.8

3.7

39.0

34.5

26.5

100.0

1996

308.9

275.0

229.0

813

-0.5

-0.1

8.5

2.0

38.0

33.8

28.2

100.0

1997

329.4

293.0

223.3

846

6.6

6.5

-2.5

4.0

38.9

34.6

26.4

100.0

1998

327.8

284.8

233.9

846

-0.5

-2.8

4.8

0.1

38.7

33.6

27.6

100.0

1999

330.1

289.0

244.1

863

0.7

1.5

4.4

2.0

38.2

33.5

28.3

100.0

2000

336.0

293.8

249.4

879

1.8

1.6

2.2

1.8

38.2

33.4

28.4

100.0

2001

338.5

298.0

252.3

889

0.7

1.4

1.1

1.1

38.1

33.5

28.4

100.0

2002

342.3

299.3

256.4

898

1.1

0.4

1.7

1.0

38.1

33.3

28.6

100.0

2003

345.2

302.0

261.0

908

0.8

0.9

1.8

1.1

38.0

33.2

28.7

100.0

2004

348.7

305.5

265.2

919

1.0

1.1

1.6

1.2

37.9

33.2

28.9

100.0

2005

352.6

308.1

269.8

930

1.1

0.9

1.7

1.2

37.9

33.1

29.0

100.0

2006

356.6

311.0

274.2

942

1.1

0.9

1.6

1.2

37.9

33.0

29.1

100.0

2007

358.8

314.3

278.8

952

0.6

1.1

1.7

1.1

37.7

33.0

29.3

100.0

2008

361.6

317.4

283.5

963

0.8

1.1

1.7

1.1

37.6

33.0

29.4

100.0

2009

364.6

320.5

288.3

973

0.8

0.9

1.7

1.1

37.5

32.9

29.6

100.0

2010

368.8

323.9

293.4

986

1.2

1.0

1.7

1.3

37.4

32.8

29.8

100.0

2015

388.6

341.3

319.8

1,050

1.1

1.0

1.7

1.2

37.0

32.5

30.5

100.0

AAPC

1999-2015

 

 

1.0

1.1

1.9

1.3

 

 

 

 

The following chart and tables show that forest products, petroleum products, coal, iron ore, and grains and all other commodities group are the most important components of the Canadian freight traffic and will remain so until 2015.


 

FREIGHT TRAFFIC BY COMMODITY GROUP & MODE
ACTUAL & FORECAST

Commodity GP

Marine

Rail

Trucking

Modal

 

1998

1999

2000

2010

2015

1998

1999

2000

2010

2015

1998

1999

2000

2010

2015

1998

1999

2000

2010

2015

Alumina & Bauxite

7

7

7

8

8

5

5

5

6

7

0

0

0

0

0

12

12

12

14

15

Animal & Food Prod.

5

5

5

6

6

7

7

7

9

9

30

31

32

36

39

42

43

44

51

55

Chemical Prod.

7

7

7

7

8

22

22

22

25

26

11

12

13

14

15

40

41

42

47

49

Coal

53

53

53

54

57

40

39

39

41

42

1

1

1

1

1

93

93

93

97

100

Construction Mater.

29

30

30

34

35

10

11

11

11

12

12

12

12

14

15

51

52

53

59

62

Containerized

21

21

22

32

40

18

19

20

28

34

0

0

0

0

0

39

41

42

61

74

Fertilizer Mater.

11

12

11

11

12

22

23

23

26

27

1

1

1

1

1

34

36

36

38

40

Forest Prod.

24

25

25

28

31

42

43

44

49

51

53

56

58

68

75

119

124

126

145

156

Grains

31

31

33

33

34

31

31

33

33

34

5

6

6

7

7

67

68

72

73

74

Iron Ore

45

45

47

47

48

39

39

39

40

41

0

0

0

0

0

84

84

86

88

89

Manufactured Prod.

0

0

0

0

0

6

6

6

7

7

9

10

10

12

14

15

16

16

19

21

Non-Ferrous Metals

3

3

3

3

3

6

6

6

6

6

1

2

2

2

2

10

10

10

11

11

Petroleum Prod.

66

67

68

77

79

12

12

12

14

15

25

25

25

30

32

103

104

106

121

126

Salt

8

9

9

10

10

2

2

2

2

2

2

2

2

3

3

13

13

13

14

15

Steel

5

5

5

5

5

7

7

7

8

8

18

21

21

25

27

31

32

32

38

41

TOFC

0

0

0

0

0

2

2

2

2

2

0

0

0

0

0

2

2

2

2

2

Other Commodities

12

11

11

12

12

15

16

16

17

18

65

66

68

81

89

92

93

94

110

119

Total Freight Traffic

328

330

336

369

389

285

289

294

324

341

234

244

249

293

320

846

863

879

986

1,050

Source: TAF Consultants

 

COMMODITY GROUP SHARE OF TRAFFIC BY MODE:
ACTUAL
& FORECAST
(Percentage)

Commodity GP

Marine

Rail

Trucking

Modal

 

1998

1999

2000

2010

2015

1998

1999

2000

2010

2015

1998

1999

2000

2010

2015

1998

1999

2000

2010

2015

Alumina & Bauxite

2.0

2.0

2.0

2.1

2.1

1.8

1.8

1.8

1.9

1.9

0.0

0.0

0.0

0.0

0.0

1.4

1.4

1.4

1.4

1.4

Animal & Food Prod.

1.5

1.6

1.6

1.6

1.7

2.4

2.4

2.4

2.6

2.7

12.9

12.8

12.7

12.4

12.2

4.9

5.0

5.0

5.2

5.2

Chemical Prod.

2.0

2.0

2.0

2.0

2.0

7.7

7.6

7.6

7.6

7.7

4.8

5.0

5.0

4.9

4.8

4.7

4.7

4.8

4.7

4.7

Coal

16.2

16.0

15.9

14.7

14.6

13.9

13.4

13.2

12.8

12.4

0.3

0.3

0.3

0.3

0.3

11.0

10.7

10.6

9.8

9.5

Construction Mater.

8.9

9.0

9.0

9.1

9.1

3.6

3.6

3.6

3.5

3.4

5.0

5.0

4.9

4.8

4.7

6.0

6.1

6.0

6.0

5.9

Containerized

6.3

6.5

6.6

8.8

10.3

6.3

6.6

6.7

8.8

10.1

0.0

0.0

0.0

0.0

0.0

4.6

4.7

4.8

6.2

7.1

Fertilizer Mater.

3.4

3.6

3.4

3.1

3.1

7.7

7.9

7.9

8.0

7.9

0.4

0.4

0.4

0.4

0.4

4.0

4.2

4.0

3.9

3.8

Forest Prod.

7.4

7.6

7.4

7.6

7.9

14.8

15.0

14.8

15.0

14.9

22.6

22.9

23.2

23.3

23.4

14.1

14.4

14.4

14.7

14.9

Grains

9.4

9.4

9.8

9.1

8.7

10.8

10.7

11.3

10.2

9.8

2.3

2.3

2.3

2.3

2.2

7.9

7.8

8.2

7.4

7.1

Iron Ore

13.9

13.7

13.9

12.9

12.4

13.7

13.3

13.4

12.4

11.9

0.0

0.0

0.0

0.0

0.0

10.0

9.7

9.8

8.9

8.4

Manufactured Prod.

0.1

0.1

0.1

0.1

0.1

2.0

2.1

2.1

2.1

2.1

4.0

4.0

3.9

4.1

4.2

1.8

1.9

1.8

1.9

2.0

Non-Ferrous Metals

0.8

0.8

0.8

0.8

0.8

2.0

2.1

2.0

1.9

1.8

0.6

0.6

0.6

0.6

0.6

1.2

1.2

1.1

1.1

1.1

Petroleum Prod.

20.2

20.3

20.3

20.9

20.3

4.3

4.2

4.2

4.4

4.5

10.5

10.3

10.2

10.1

10.0

12.2

12.1

12.1

12.3

12.0

Salt

2.6

2.6

2.6

2.6

2.6

0.7

0.7

0.7

0.7

0.7

1.0

1.0

1.0

0.9

0.8

1.5

1.5

1.5

1.5

1.4

Steel

1.7

1.4

1.4

1.4

1.4

2.5

2.5

2.4

2.4

2.4

7.8

8.4

8.3

8.4

8.6

3.6

3.8

3.7

3.8

3.9

TOFC

0.0

0.0

0.0

0.0

0.0

0.7

0.6

0.6

0.5

0.5

0.0

0.0

0.0

0.0

0.0

0.2

0.2

0.2

0.2

0.2

Other Commodities

3.6

3.4

3.3

3.2

3.1

5.4

5.4

5.3

5.3

5.4

27.8

27.1

27.1

27.5

27.9

10.9

10.8

10.7

11.1

11.4

Total Freight Traffic

100

100

100

100

100

100

100

100

100

100

100

100

100

100

100

100

100

100

100

100

Source: TAF Consultants

 


CHAPTER I:   REVIEW OF FORECAST ASSUMPTIONS

The methodology used in this forecast study combines both quantitative and qualitative techniques including: econometrics[4], market research, regional and industrial complex analysis. Each commodity group and mode is analyzed separately and the applied methodology will depend on the characteristic of the commodity/mode under consideration. The Economic Analysis Directorate ACA’s comprehensive Commodity Flows Database and TAF’s Commodity Flows Information and Forecasting systems are used extensively to develop the freight flow forecasts. The methodology used to develop the modal freight forecasts will be further discussed in Appendix A, “Forecast Methodology”.

This chapter presents global and national economic forecast assumptions upon which the modal freight traffic forecasts to 2015 are based. The economic assumptions are estimated based on projections prepared[5] by the World Bank, the International Monetary Fund (IMF), the Organisation for Economic Co-operation and Development (OECD), the Conference Board of Canada and Informetrica. This Chapter also reviews the impacts of policy, regulatory and infrastructure changes in Canada. Assumptions specifically related to commodity/group flow forecasts will be presented in Chapter II, Commodity Flow Forecasts.

BACKGROUND

Economic, political, technological, institutional and environmental factors at domestic and global levels are changing and with them the pattern of the World and North American trade and, consequently, Canadian freight transportation flows. The major factors contributing to this situation include: the globalization of the world economy, as reflected in the widening and intensifying international linkages in trade and finance, the formation of trade blocs such as the North American Free Trade Agreement (NAFTA) - which reflects the continued growth in importance of the U.S. and to a lesser degree the Mexican markets to Canada - the political and economic expansion of the European Union (EU), the political and economic development in Russia and Eastern Europe, the economic crisis of emerging trade blocs in East Asia and in the South Pacific, the economic situation in Latin America and finally the economic and political uncertainty in the developing countries.

Reflecting this global economic, trade and transportation interdependence was the Asian Crisis. Late in 1997 several East Asian countries experienced a massive reversal of the large foreign private capital inflows they enjoyed through much of the 1990’s. The net swing from inflows to outflows between 1996 and 1997 amounted to more than $100 billion for the five crisis countries: Indonesia, South Korea, Malaysia, the Philippines, and Thailand. This amount was equivalent to 11% of their gross domestic products (GDP) before the crisis. The reversal precipitated a steep devaluation of currencies, large increases in interest rates and severe declines in stock and other asset prices. This initiated the deep financial and economic crises that has crippled these countries. The effects of these crises have had a negative impact on other countries. But instead of dying away quickly, as they did after the 1994 Mexico peso crisis, these developments were the precursor, to a certain degree, of currency and financial crisis in the Russian federation in August 1998 followed by a more general withdrawal of private capital from emerging markets.

The impact of the Asian crisis on Canadian marine traffic was reflected in a 10% decline of the Canadian marine freight exports to Asia, from 62 Mt in 1997 to 55.8 Mt in 1998. Meanwhile, marine Imports from Asia jumped by 49.2% from 3.0 Mt in 1997 to 4.5 Mt in 1998 (see Tables 1a & b and Charts 1a & b).

A relative confidence has now returned in financial markets. Global economic growth is now estimated to be about 3% in 1999. Thus it appears that the world economic growth bottomed out at 2.5% in 1998, in what the IMF economic projections suggest will have been the mildest of the four slowdowns in the world economy in the past three decades, despite the severity of the recessions in several countries (see Table 1.1).

Table 1a: Real GDP for Selected Crisis Countries

 

1997

1998

1999f

Countries

Percent Change

Japan

1.4

-2.8

1.0

South Korea

5.0

-5.8

6.5

Taiwan

6.8

4.9

5.0

Hong Kong

5.3

-5.1

1.2

Singapore

9.0

0.3

4.5

China

8.8

7.8

6.6

Indonesia

4.7

-13.7

-0.8

Malaysia

7.7

-6.7

2.4

Philippines

5.2

-0.5

2.2

Thailand

-1.3

-8.4

4.0

Russia

0.9

-4.6

0.0

Brazil

3.7

0.1

-1.04.0

                                                Source: IMF Outlook, October 1999

Table 1b Canadian Marine Freight Trade with Asia

 

Exports

Imports

Country

1997

1998

% Change

1997

1998

% Change

Japan

34.9

30.0

-14.0

0.7

1.2

71.1

South Korea

10.7

7.1

-33.5

0.3

0.6

82.7

China

5.8

6.2

8.0

0.4

0.6

28.6

Taiwan

2.8

3.2

14.9

0.3

0.4

33.5

Indonesia

2.0

1.7

-12.8

0.1

0.2

71.1

Philippines

1.2

0.9

-24.9

0.0

0.1

193.7

Hong Kong

1.0

1.2

20.5

0.5

0.6

17.1

Malaysia

0.8

0.6

-20.6

0.1

0.1

10.9

Thailand

0.5

0.2

-63.6

0.1

0.2

21.8

Singapore

0.4

0.5

27.4

0.2

0.2

-20.6

All Other

2.0

4.2

107.6

0.2

0.4

164.1

Total Asia

62.0

55.8

-9.9

3.0

4.5

49.2

                Source: TAF COMFIS /Statistics Canada

                                                                                        Chart 1 a & b  

For all the Asian crisis economies, growth projections for 1999 have been revised significantly upward. Some Asian crisis countries, notably the Republic of Korea and Malaysia, appear to have started to recover more rapidly than expected earlier. The worst fears about the ramification of the Russian crisis have not been realized and the crisis in Brazil has largely been confined to the region. Furthermore, oil prices have recovered due to OPEC measures, and declines in many other commodity prices have been stabilized, providing relief for some commodity-exporting countries affected by the ripple effects of the slowdown.

In Japan, where there the 1998 GDP declined by 2.8% it is now projected to rise by 1% in 1999. Moreover, the anticipated strengthening of growth in Europe seems to be materializing, while the impressive U.S. expansion has continued, amid few signs of emerging price or wage pressures.  The strength of the U.S. economy was the result of a number of temporary factors that have lowered import prices, such as lower oil and most commodity prices, excess capacity elsewhere and the appreciation of the U.S. dollar. This has facilitated the combination of rapid output growth with low inflation. Other factors of a more structural nature, such as the rapid expansion of productivity in advanced technology industries, have lowered prices and boosted the growth in various sectors of the U.S. economy, perhaps indicating some upward shift in the level of potential output. Whether or not this favourable environment for the U.S. economy can continue for much longer remains a major question.

In Canada, where inflation and balance of payments issues are currently less critical, there is a growing concern relating to the impact of changes in the economies of the country’s key trading partners. In this respect, as the situation in Asia is apparently stabilizing, the future course of the U.S. economy has moved to the foreground. Trade liberalization in North America and the effects of the Asia crisis have meant that about 85% of the value of Canada’s merchandise exports presently go to the U.S. as compared to approximately 70% in the late eighties.

There remains a great deal of uncertainty in the world economic outlook for the next few years. This includes the uncertainties in the future course of policy reforms in the European Union and the next WTO round on agriculture, which started in 1999, one year before the end of the Uruguay Round Agreement on Agriculture (URAA) implementation period (1995-2000). For example the production in many countries remains largely determined by domestic support policies, rather than market prices. In an oversupplied market with low prices there is the risk of countries taking unilateral actions through trade measures in an attempt to stimulate exports. In particular, there is the risk of renewed growth in protectionist policies leading to new export subsidy competition between the major players in world agriculture markets.

While the prospect for new disturbances in emerging markets are receding, there are concerns about the fragility of the economies in developing countries and the vulnerability of other emerging nations in Asia, Latin America and the Middle East to a similar Asian crisis. Economic conditions in Russia could worsen significantly, in which case its immediate neighbouring countries might be pulled down as well. The Brazilian crisis may deepen further with serious additional spill-over effects for the Latin American economy in general. The slowdown in the Chinese economy could be longer than anticipated, prompting a currency depreciation with repercussions in other Asian economies. An additional risk factor relates to potential financial market reactions to actual or perceived Y2K compliance problems in emerging markets.

On the domestic front, policy, regulatory and infrastructure changes resulting from implementation of the Canada Transportation Act, Marine Policy reform, and privatization of CN have had, and will continue to impact on commodity flows. CN’s recent acquisition of the Illinois Central could also be of some significance. Grain transportation and handling has been reviewed by Mr. Justice Willard Estey and Arthur Kroeger has recently reported on how the Estey recommendations can be implemented. While there are concerns about the condition of the highway infrastructure in Canada, truck traffic, particularly resulting from increased emphasis on just-in-time delivery, continues to increase. With the incidence of increased market share, smaller loads and increased north-south traffic, border crossings are becoming increasingly congested. CN and CP have been conducting trial operations of new intermodal technologies with a view to regaining traffic previously lost to over-the-road transport in the major Ontario and Quebec corridors. CN’s Ecorail subsidiary has moved its Quebec terminal from Drummondville to Montreal and has recently ordered 200 Road Railer trailers for its Montreal-Toronto service, presumably supplanting the former Ecorail equipment. The acquisition of the RoadRailer trailers may lead to an increase in domestic intermodal capacity in that corridor. The St. Lawrence Seaway has been commercialized and this could have an impact on the competitiveness of the Great Lakes - Seaway System, particularly with the railways. 

These economic, political, technological, institutional and environmental factors are taken into account in the development of the freight traffic forecasts. Changes to one or more of these factors during the forecast period can influence, to varying degrees, and at different periods of time, anticipated specific commodity flows through alternative transportation modes and routes. The general conditions that have been assumed for this forecast are described below. Assumptions specifically related to commodity/group flow forecasts will be presented in Chapter II, Commodity Flow Forecasts.

 

1.1     GLOBAL FORECAST ASSUMPTIONS

 

         The world economy is expected to grow by 3.0% in 1999 and should expand by an average annual rate of growth of 2.9% during the 2000-2015 forecast period. Meanwhile, the economies of the Industrialized countries are expected to grow by 2.6% in 1999 and by an annual average rate of 2.5% and 2.4% compared with 3.5%, 3.8% and 4.2% respectively for the developing countries[6]. Sustained economic recovery in industrialized countries is anticipated, as they continue to control inflation by following anti-inflationary monetary policies. Inflation in industrialized countries should average 2.0% annually, compared to 6.6% in developing countries. The rising importance of the latter in world trade has helped dampen the effects of the recession in industrialised countries and has contributed to their growth in output during recovery (see Table 1.1).

 

Table 1.1: WORLD ECONOMIC GROWTH BY WORLD REGION

 

1997 GDP

1991-97

1997

1998p

1999e

2000-10

2011-15

 

US$ billions

Percent Change*

World

29,100

2.3

4.2

2.5

3.0

2.9

2.9

Advanced Economies

22,670

2.1

3.2

2.2

2.8

2.6

2.5

  Industrial Countries

21,480

2.0

2.9

2.4

2.6

2.5

2.4

    G-7 Countries (OCED)

18,465

1.9

2.6

2.2

2.6

2.4

2.3

    Other Industrial (OECD)

3,015

2.0

4.2

3.5

2.5

3.1

2.9

  Other High-Income**

1,190

6.4

5.3

-1.8

5.9

4.3

4.0

Developing Countries

6,430

3.2

5.8

3.2

3.5

3.8

4.2

 East Asia  & Pacific

1,610

9.9

7.1

1.5

4.9

5.4

5.5

 South Asia

495

6.2

5.0

5.8

5.6

5.2

5.3

 Latin America

2,020

3.3

5.3

2.2

0.1

3.3

3.4

 Eastern Europe & Central Asia

1475

-4.4

2.6

0.5

1.2

3.1

3.3

 North Africa & Middle East

500

2.9

3.1

2.5

2.2

3.0

3.1

 Other Africa

330

2.4

3.5

3.6

3.3

3.1

3.2

World Inflation

%

4.4

2.8

2.9

2.5

2.6

2.7

Advanced Economies

%

2.6

2.1

1.5

1.4

2.0

2.1

Developing Countries

%

11.7

9.2

10.3

6.7

6.6

6.5

Note:       * Average Annual Percentage Change (AAPC) of Real GDP

**Including Hong Kong, Singapore, Taiwan, Israel, Kuwait, United Arab Emirates, Qatar, Cyprus, Greenland, ….

e: estimated,  p: preliminary

Source: Estimate based on World Bank projections, December 1998, and the IMF economic outlook, October 1999.

 

 

         World population is projected to grow by about 1.1% over the forecast period from an estimated 5.9 billion in 1998 to 7.1 billion in the year 2015. The developed countries’ population is expected to grow by an annual average of 0.3%, compared to about 1.3% for developing countries. Asia should continue to dominate in terms of absolute annual increase in population. Meanwhile, the largest proportionate increases in the share of world population will continue to be in Other Africa, followed by North Africa & Middle East, which are expected to increase by an annual average of about 2.3% and 1.9% respectively during the forecast period (see Table 1.2).

 

Table 1.2: WORLD POPULATION GROWTH BY WORLD REGION:

 

1998

2010

2015

1998-2015

World Region

Millions

% Share

Millions

% Share

Millions

% Share

% Growth

World

5,883

        100.0

6,719

       100.0

7,114

     100.0

1.1

 Developed Countries

930

          15.8

967

         14.4

984

       13.8

0.3

  North America

300

           5.1

331

           4.9

345

        4.8

0.8

    Canada

30.5

           0.5

34

           0.5

35

        0.5

0.8

    USA

270

           4.6

298

           4.4

310

        4.4

0.8

 All Other High Income

630

          10.7

636

           9.5

639

        9.0

0.1

 Developing Countries

4,953

          84.2

5,752

         85.6

6,130

       86.2

1.3

  East Asia  & Pacific

1,767

          30.0

1,963

         29.2

2,051

       28.8

0.9

  South Asia

1,300

          22.1

1,539

         22.9

1,652

       23.2

1.4

  Latin America

500

           8.5

585

           8.7

624

        8.8

1.3

  Eastern Europe & Central Asia

475

           8.1

484

           7.2

487

        6.9

0.2

  North Africa & Middle East

285

           4.8

358

           5.3

394

        5.5

1.9

  Other Africa

626

          10.6

823

         12.2

922

       13.0

2.3

Source: Estimate based on World Bank projections.

 

 

     The assumption with respect to the World GDP per capita is a growth of 1.7% during the 2000-2015 forecast period. The advanced economies’ GDP per capita is expected to grow by 2.3% and 2.1% during the 2000-2010 and 2011-2015 forecast periods respectively, compared to 2.5% and 2.9% respectively in the developing countries (see Table 1.3).

 

Table 1.3: WORLD GDP PER CAPITA GROWTH BY WORLD REGION

World Region

1997 GDP per capita

1991-97

1997

1998p

1999e

2000-10

2011-15

 

US$ billions

 

Percent Change*

 

 

World

4,985

0.8

1.8

1.3

1.8

1.7

1.7

Advanced Economies

24,647

1.4

2.2

1.9

2.5

2.3

2.1

Developing Countries

1,259

1.6

3.2

2.0

2.3

2.5

2.9

 East Asia  & Pacific

899

8.5

5.9

0.6

4.0

4.5

4.6

 South Asia

400

4.3

3.1

4.3

4.1

3.7

3.8

 Latin America

4,248

1.5

3.5

0.9

-1.2

1.9

2.1

 Eastern Europe & Central Asia

2,424

-4.7

2.5

0.3

1.0

2.9

3.1

 North Africa & Middle East

1,785

0.6

0.6

0.6

0.3

1.1

1.2

 Other Africa

534

-0.2

0.5

1.3

1.0

0.8

0.9

Note* Average Annual Percentage Change (AAPC) of Real GDP.  e: estimated, p: preliminary

Source: Estimate based on World Bank projections, December 1998 & IMF economic outlook, October 1999.

 

 

         It is assumed that commitments made in the Uruguay Round Agreement will be implemented. It is also assumed that the commitments made in regional trade agreements such as the North American Free Trade Agreement (NAFTA), will be fully implemented.

 

         World trade increases are projected at the annual rate of 4.9% in 1999 and at an average annual rate of 6.1% and 6.0% during the 2000-2010 and 2011-2015 forecast periods respectively. This is based on the assumption that global trade liberalization policies will continue. OECD countries’ imports are to grow by 6.3%, 5.8% and 5.7% respectively during the same forecast periods, compared to 2.8%, 2.6% and 6.2% for developing countries during the same period. Meanwhile, the OECD countries’ exports are expected to increase by 2.8% in 1999, followed by an average annual rate of 5.6% and 5.5% during the forecast periods respectively, compared to 3.0%, 6.9% and 6.9% respectively for the developing countries (see Table 1.4).

 

TABLE 1.4: WORLD TRADE GROWTH BY WORLD REGION

 

1991-97

1997

1998p

1999

2000-10

2011-15

 

Percent Change*

World Trade

6.8

10.5

3.9

4.9

6.1

6.0

Imports

 

 

 

 

 

 

Advanced Economies

6.2

9.9

5.1

6.2

6.1

6.0

 OECD Countries

5.4

10.9

6.6

6.3

5.8

5.7

 Non-OECD Countries

11.5

5.9

-2.7

1.8

6.7

6.6

Developing Countries

9.2

10.4

-1.3

2.8

6.2

6.2

 East Asia  & Pacific

13.5

4.5

-8.7

1.7

7.3

7.3

 South Asia

12.1

8.9

4.1

4.5

8.4

8.4

 Latin America

14.1

16.1

3.8

4.0

5.4

5.4

 Eastern Europe & Central Asia

5.8

9.6

3.7

3.9

5.2

5.2

 North Africa & Middle East

1.3

10.8

3.0

3.3

5.5

5.5

 Other Africa

3.5

5.8

3.7

4.0

5.3

5.3

Exports

 

 

 

 

 

 

Advanced Economies

6.4

11.1

3.8

3.2

5.9

5.8

 OECD Countries

5.9

12.2

3.0

2.8

5.6

5.5

 Non-OECD Countries

10.3

7.6

7.9

3.5

7.5

7.4

Developing Countries

8.7

12.4

4.6

3.0

6.9

6.9

 East Asia  & Pacific

15.2

13.9

8.4

3.7

8.5

8.5

 South Asia

11.1

11.2

4.6

3.3

9.5

9.9

 Latin America

9.7

12.6

6.1

2.4

6.7

6.7

 Eastern Europe & Central Asia

5.3

6.7

3.2

2.3

5.5

5.5

 North Africa & Middle East

4.2

8.3

3.4

2.5

4.3

4.3

 Other Africa

2.6

7.7

3.5

2.6

5.1

5.1

Note* Compounded annual growth rates.    e: estimated, p: preliminary.
Source: Estimate based on World Bank Projections, December 1998 and OECD Economic Outlook, June 1999.

         Oil Prices: After bottoming out at a monthly average of U.S. $12 in February 1999, the price per barrel shot up to about $34 early this year. This was the result of agreed production cutbacks at the March 1999 meeting of the Organization of Petroleum Exporting Countries (OPEC). World oil prices in 2000 are expected to average $23 per barrel. This forecast assumes that OPEC member compliance remains relatively strong through the winter, but that OPEC production increases after March 2000, either by an increase in quotas or a decrease in compliance to set quotas. Even with increased oil supplies from OPEC and non-OPEC countries, this production profile should draw down world oil stocks to well below normal levels by the end of the winter period. Increases in OPEC crude oil production after March 2000 are not expected to be large enough to allow the world oil price to slip below $20 per barrel. In the long term, oil prices are expected to increase during the 2000-2015 forecast period, reaching an annual average of $31.4 per barrel[7] by the year 2015.

1.2     U.S. ECONOMIC FORECAST ASSUMPTIONS

The strength in the U.S. economy continued to exceed expectations in the first half of 1999, and it now seems likely that, for the third successive year, output growth in 1999 as a whole will be 4.0%. The expansion is notable not only for its duration. There have been increases in the growth of labor productivity in the past two years, which is unusual for the mature phase of a cyclical expansion. This seems to be related partly to the rapid expansion of fixed investment and the capital stock in recent years, and partly to faster technical progress. The expansion has been remarkable also for the behavior of inflation, which has shown no significant sustained increase as resource utilization has risen in the economy as a whole despite increases in oil and other commodity prices. Whether or not this favourable environment for the U.S. economy can continue for much longer remains a major question.

The Freight Traffic forecasts are based on the following U.S. economic related forecast assumptions (see Table 1.2.1).

         U.S. economy is expected to grow by 4.0% in 1999 and at an average annual percent change (AAPC) of 2.3% between 2000 and 2010 and by 2.2% during the 2011-2015 period.

         U.S. industrial production index should increase by 2.5% in 1999 and by an average 3.1% and 2.9% during the 2000-2010 and 2011-2015 forecast periods respectively.

         U.S. Inflation[8] is forecast to rise by 2.0% in 1999 and by an average annual of 2.6% during the 2000-2015 forecast period.

         U.S. unemployment rate should be 4.2% in 1999 and is expected to average 5.6% during 2000-2015 forecast period.

         U.S. Housing starts should decline by 0.4% in 1999 and then grow by an average annual rate of 0.2% during the 2000-2015 forecast period.

         The U.S. dollar Exchange rates index will likely increase to 100.0 in 1999 and then decline to an annual average of 92.8 during the 2000-2010 period, and 88.2 during the 2011-2015 forecast period.

         U.S. exports are forecast to increase by 3.2% in 1999 and expand by an average annual rate of growth of 6.5% and 6.0% during the 2000-2010 and 2011-2015 forecast periods respectively. Meanwhile, U.S. imports are to climb by 8.1% in 1999 and grow by an annual average of 5.4% and 5.1% during the same forecast periods respectively.  

Table 1.2.1: U.S. ECONOMIC ASSUMPTIONS

 

 

1998

1991-97

1997

1998

1999

2000-10

2011-15

2000-15

 

Unit

 

 

Percentage Change*

 

 

 

Gross Domestic Product

Billions$92

7,552

3.0

3.9

3.9

4.0

2.3

2.2

2.3

Industrial Production Index

1987=100

131

4.6

6.0

3.7

2.5

3.1

2.9

3.1

Manufacturing Index

1987=100

135

5.1

6.7

4.2

2.6

3.2

3.0

3.2

Population

Millions

270

1.0

0.9

0.9

0.9

0.8

0.8

0.8

Employment

Millions

131.5

1.6

2.2

1.5

1.6

0.9

0.9

0.9

Unemployment rate

Percentage

4.5

6.1

4.9

4.5

4.2

5.6

5.6

5.6

Consumer Price Index

1982-84=100

163

2.8

2.3

1.6

2.0

2.6

2.6

2.6

U.S.$ exchange rates index

1973-75=100

99

89.7

96.0

99.0

100.0

92.8

88.2

91.3

Auto sales

Millions

8.2

0.1

-3.4

0.2

0.2

-0.4

-0.1

-0.3

Exports

Billions $92

985

8.4

12.8

1.5

3.2

6.5

6.0

6.4

Imports

Billions $92

1,223

10.1

13.9

10.6

8.1

5.4

5.1

5.3

Housing starts

Thousands

1,623

6.8

0.5

10.0

-4.0

0.1

0.4

0.2

*Average Annual Percentage Change (AAPC).
Source: Estimate based on Informetrica, DRI and OECD projections.

 

1.3     CANADIAN ECONOMIC FORECAST ASSUMPTIONS

The continued strength in the U.S. economy has contributed to Canada’s recent robust growth performance. Economic growth in Canada has continued to grow for most of the period since mid-1996, despite the slowdown of late 1997 and early 1998 associated with the Asian crisis and weakness of commodity prices. The Canadian economy in 1998 fared well. Employment growth was the best of the 1990s, while core consumer price inflation has remained close to the lower end of the 1%-3% target ranges.

The economic boom in the United States allowed manufacturing to maintain its position as an engine of growth in Central Canada, with manufacturing gains concentrated in high-tech and transportation equipment. In 1999 the Canadian economy is expected to grow by 4.0%. The strong growth is mainly due to the extraordinary pace of machinery and equipment investment posted in the second quarter.

The Freight Traffic forecasts are based on the following Canadian economic related forecast assumptions (see Table 1.3.1).

         The Canadian economy should grow by 4.0% in 1999 and at an average annual rate of 2.4% and 2.2% during the 2000-2010 and 2011-2015 forecast periods respectively.

         The Canadian industrial production index is expected to increase by 4.5% in 1999 and by 2.7% and 2.3% during the 2000-2010 and 2011-2015 forecast periods respectively.

         Inflation is expected to be in the order of 1.7% in 1999 and at the average annual rate of 2.0% and 2.2% during the 2000-2010 and 2011-2015 forecast periods respectively.

         Canadian unemployment rate should decline to 7.6% in 1999 and is expected to average 7.3% and 7.2% during the 2000-2010 and 2011-2015 forecast periods respectively.

         Recent strength in commodity prices, which raise input costs to housing construction, could soften the housing market. But, on the other hand, a robust economy, thriving export market, improved business confidence and improved commodity prices, could translate into higher disposable income and spending which would have a positive effect. Housing Starts are expected to increase by 6.6% in 1999 and are expected to average an annual rate of 1.8% and 1.4% during the 2000-2010 and 2011-2015 forecast periods respectively.

         Exchange rates for the Canadian dollar against the U.S. dollar should average 67.3 in 1999, and 68.8 and 70.5 during the 2000-2010 and 2011-2015 forecast periods respectively.

         Canadian exports are to increase by 8.5% in 1999 and to expand by an average annual rate of growth of 5.4% and 5.3% during the 2000-2010 and 2011-2015 forecast periods respectively. Canadian imports are to rise by 4.7% in 1999 and grow by an annual average of 5.3% and 5.4% during the same periods respectively.

Table 1.3.1: CANADIAN ECONOMIC ASSUMPTIONS

Canadian Economy

Unit

1998

1991-97

1997

1998

1999

2000-10

2011-15

2000-15

 

 

 

 

 

Percent Change*

 

 

 

Gross Domestic Product

Billions $92

721

2.5

4.1

2.9

4.0

2.4

2.2

2.4

Industrial Production Index

1986=100

158

3.8

5.5

2.3

4.5

2.7

2.3

2.6

Population

Millions

30.6

1.2

1.1

1.0

1.0

0.9

0.9

0.9

Employment

Millions

14.10

1.3

2.3

2.7

2.8

1.4

0.8

1.2

Unemployment Rate*

Percentage

8.3

4.7

9.1

8.3

7.6

7.3

7.2

7.3

Consumer Price

1986=100

108.6

1.5

1.6

0.9

1.7

2.0

2.2

2.1

Exchange Rates

USper$Can

67.4

77.0

72.2

67.4

67.3

68.8