Conclusion
It appears that there is no consensus as to what the Asian Currency Crisis has in store for consumers and investors worldwide. We are bombarded by statistics citing falling GDP due to a decrease in exports. About 8% of our exports involve Asian markets. Luckily, the U.S. economy accounts for 80% of our exports and remains remarkably robust. However, Canadian sales in the U.S. have already slowed to only half the pace of earlier years despite the advantage of our undervalued dollar. On the other hand, CIBC predicts strong growth fuelled by growing domestic demand and strong consumer spending.
The Canadian dollar has been sideswiped by foreign capital fleeing the instability of emerging markets and taking refuge in the US$ and bond markets. Steadily declining commodity prices and Canada’s international reputation as a company whose economy is dependant on resources have conspired to place added pressure on an already weak currency and large corporations dependant on resources.
As of yet, Canadian consumers have seen no real decline in the prices of Asian imports. Although the likelihood of this appears strong, consumers are likely to postpone major purchases in the event of price savings down the road. Investors still have plenty of good opportunities as the Dow and TSE indexes continue their bull run. However, some sectors such as base metals, forestry products and other commodities (i.e. Oil & Gas) should be avoided due to the drastic reductions in demand stemming from the Asian ripple effect in Canada.
The falling growth rates in Asia and the effects on other countries worldwide may have a deflationary effect on global economies such as Canada in the months and even years to come. However, these effects are difficult to predict leaving consumers and investors to the mercy of the market. If the effects currently being demonstrated in Asia (falling demand, decreased production, lower profits) are duplicated across the worldwide economy, such a deflation would induce a slowdown in spending, devestate growth, drive thousands of companies into bankruptcy and throw millions out of work.