The value of the Canadian dollar might be falling, leading to grumbling among Canadian shoppers and travellers. But according to the country's top executives, the loonie's descent has been a good thing.
A new survey sponsored by KPMG finds that 65 per cent of Canadian executives think the devaluation of the dollar has been beneficial to the Canadian economy.
The 34th C-Suite Quarterly survey polled around 150 executives from Canada's biggest companies earlier in March. It found that while most agree that Canada's economy works best with a weaker dollar, only 43 per cent of the execs said the lower loonie would benefit their own company.
It was only a few short months ago that the loonie was doing so well and it was hovering over 100-cent US level. But, the U.S. currency has soared in recent months, forcing the loonie back down to 90 cents.
Most analysts don't expect the Canadian dollar to rebound any time soon. Earlier this month, the Royal Bank said it expected the dollar would fall to about 87 cents US by the end of this year and dip to 85 cents by the end of 2015.
The C-Suite survey found that while only 43 of the execs thought the lower loonie is better for their business, that rose to 55 to execs within the resources sector. Those in the services sectors said the migrating loonie was more of a zero sum game.
In terms of their own companies, 41 per cent of the execs said they would prefer a dollar at 95 cents or above. Another 26 per cent would welcome a range of between 90 and 95 cents. Only 19 per cent said the optimal value for the dollar lies below 90 cents.
Earlier this month, the former chief economic analyst for Statistics Canada, Philip Cross, released a paper arguing that a weak loonie will likely do more harm than good to the Canadian economy.
He said the theory that a weaker loonie makes Canadian products more competitive in foreign markets is outdated since it doesn't take into account how the lower dollar affects consumer prices and interest rates.
He also said that Canadian manufacturers have grown used to a stronger currency and won't be able to shift their practices to account for the loonie's fall.
The C-Suite survey also found that most execs believe there is no single factor that has allowed the loonie's value to fall. But most say the U.S.'s strong economy has been an important factor driving down the value of our dollar. A full 53 per cent said that was a very important factor, with another 42 per cent saying it was somewhat important.
Only 26 per cent of the execs thought that Bank of Canada policies have been very important in determining the loonie's value, with an equal number saying it was either not very important or not at all important.
The survey also found that most of the execs felt the downturn in Canada's commodities sectors had underscored to them that the Canadian economy needs to adapt to become less dependent on commodities. A full 62 per cent said the current downturn in the sectors demonstrates the overreliance of Canada’s economy on resources and underscores the need to diversify.
The 34th C-Suite Quarterly Survey was conducted by telephone and polled 152 executives from ROB 1000 companies between March 4 and 24, 2014.
