Canada will sell fewer goods and services next year because of falling oil prices and slumping global demand, according to a new outlook released Wednesday by Export Development Canada.

The Crown corporation said Canada's exports will shrink by one per cent in 2009 as sales into the United States and United Kingdom will slide by two per cent.

"A struggling consumer, an apprehensive investment climate and floundering manufacturing activity mean that U.S. real imports will fall for the second consecutive year," said EDC chief economist Peter Hall in the organization's fall outlook.

Once prices are subtracted, the volume of Canadian exports will fall by one per cent in 2009. That figure actually represents an improvement compared to the five per cent contraction in Canadian export volumes that EDC is forecasting for this year.

Commodity woes

Hall said the ongoing U.S. mortgage crisis is only one factor hurting Canada's export picture.

Prices for everything from oil to zinc and aluminum slid in 2008 and will continue to drop in value next year, according to EDC's forecast.

The corporation, which helps Canadian companies find export markets, is forecasting oil to average $84 U.S. a barrel next year, a drop of almost 25 per cent compared to the $110 average for this year.

With a current per-barrel price of less than $60, however, crude values would need to rise substantially to validate EDC's forecast.

Hall pointed out that slumping oil prices really hurt Canada's overall exports, especially in provinces such as Newfoundland and Labrador, which relies on black gold for 73 per cent of its international exports, and Alberta.

EDC expects energy sales to increase by 36 per cent in 2008, almost entirely due to higher crude prices. In 2009, however, Canada's oil and gas exports will slip by nine per cent, the largest tumble in any product category.

Similarly, the organization is forecasting that Newfoundland and Labrador, at minus 13 per cent, and Alberta, at minus eight per cent, will be the provinces that experience the largest export contraction next year.

Falling oil prices also impact the nation's currency, according to EDC. For every $10 drop in global oil prices, Canada's loonie slides by three cents.

It forecasts that the currency will average 87 cents US, slightly higher than its existing level of approximately 85 cents.

Growth worries

Besides falling commodity prices and the uncertain mood in global financial markets, demand in developed countries will slump as economic growth in these regions stalls.

For instance, EDC now believes developed regions will expand by 1.2 per cent, down from the 1.7 per cent growth level for 2008.

Worse still, the all-important U.S. market, where Canada sells 80 per cents of its exports, will shrink by one per cent in 2009.

Still, EDC said there are export opportunities and growth potential for certain Canadian industries.

For instance, Canada should sell more aircraft and auto parts in 2009, an ironic situation given the current turmoil in North America's auto assembly industry.

EDC also noted that a number of countries, such as China and India, are boosting the amount their governments will spend on infrastructure in the coming months. Canada should be well placed to tap into this wave of spending, EDC said.