Conference Board of Canada downgrades 2016 growth forecast to 1.6%
The wildfires that damaged much of Fort McMurray and the surrounding areas, a weakening global economy, and the ongoing and significant deterioration in business investment have dimmed the growth outlook for Canada.
The Conference Board of Canada expects the Canadian economy to grow by just 1.4 percent in 2016, a downgrade from the 1.6 percent forecast in the previous edition of the Canadian Outlook.
“The economy got off to a good start at the beginning of the year but, unfortunately, that momentum has largely dissipated,” said Matthew Stewart, Associate Director, National Forecast, The Conference Board of Canada. “The economy will likely contract in the second quarter and then rebound towards the latter half of the year. However, this won’t be enough to offset the second quarter’s weakness.”
- The Canadian economy is expected to grow by an underwhelming 1.4 percent in 2016.
- Business investment remains the largest source of weakness in the economy and is forecast to decline again in 2016.
- Despite a low Canadian dollar, exports will slow this year due to sluggish US economic activity and a weaker global outlook.
- The wildfires which engulfed much of Fort McMurray and the surrounding areas in May and June are expected to subtract 0.1 percent from overall economic growth this year.
The largest source of weakness in the Canadian economy continues to be the slide in business investment. Business investment in the oil and gas sector fell by almost $19 billion last year, and with the price of oil expected to remain near its current level of US $50, investment in the sector is forecast to fall by another $14 billion this year.
Unfortunately, non-energy firms have not picked up the slack. Non-energy investment is expected to decline for the fourth consecutive year in 2016. We expect non-energy investment to pickup in 2017 but stay below previous peak levels until 2018.
Global economic uncertainty is also dampening the Canadian growth outlook. The global economy, which is already experiencing lacklustre growth, will be hurt by the UK’s decision to leave the European Union and by other shocks to confidence like the terrorist event in Nice and the failed coup in Turkey. Although the direct impact of these events on Canada should be minimal, there could be an impact on already weak business confidence. This, combined with sluggish U.S. investment activity, will hold back export growth through 2016. Total export growth is forecast to slow to 2.5 percent in 2016, down from 3.4 percent last year.
The wildfires that engulfed much of Fort McMurray and the surrounding areas in May and June are expected to subtract 0.1 percent from overall economic growth this year. Many oil sands operations were forced to shut down production, resulting in a massive short-term loss in output estimated at 57 million barrels, equal to $3.5 billion in lost revenues this year. Although this will have a significantly negative impact on the economy, there are some mitigating effects that will offset some of the short-term production shutdown such as firefighting and clean-up efforts, and insurance payouts.
Read the July 2016 issue of Business Review USA & Canada magazine
Dell to sell cloud-based iPaaS Boomi in US$4bn deal
Global investment firm Francisco Partners and private equity platform TPG Capital have entered into an agreement with Dell Technologies to acquire cloud-based integration platform as a service provider Boomi in a cash deal valued at US$4bn. The deal is expected to complete this year.
“Boomi has flourished as part of Dell Technologies, growing exponentially since we acquired them in 2010. This proposed transaction positions Boomi for its next phase of growth and is the right move for both companies, our shared customers and partners,” said Jeff Clarke, vice chairman and chief operating officer of Dell Technologies.
“For us, we're focused on fuelling growth by continuing to modernise our core infrastructure and PC businesses and expanding in high-priority areas including hybrid and private cloud, edge, telecom and APEX. All designed to help organisations thrive in the do-from-anywhere economy.”
Dell’s Boomi sell-off follows VMware spin-off
This announcement comes just two weeks after Dell said it would spin-off its 81% equity ownership of VMware to form two standalone companies. This would result in an expected US$9.3bn cash dividend payment to Dell, which says it will use those funds to pay down debt.
When Dell acquired Boomi in 2010 for an undisclosed fee, Boomi offered the industry’s only pure SaaS application integration platform, powered by its revolutionary AtomSphere technology. Dell saw Boomi as addressing one of the top barriers to cloud adoption at that time, which was managing and integrating cloud-based applications with existing applications and databases.
Now, Boomi has more than 15,000 customers globally and is still seen as a leader when it comes to organisations connecting applications, processes and people across a range of locations and devices – a process that can take weeks rather than months.
“I am incredibly proud that through innovation, passion and relentless execution, the Boomi team has created a unified platform for the modern-day hybrid IT landscape that thousands of customers worldwide depend on to digitally transform their business,” said Chris McNabb, chief executive officer of Boomi.
“By partnering with two tier-one investment firms like Francisco Partners and TPG, we can accelerate our ability for our customers to use data to drive competitive advantage. In this next phase of growth, Boomi will be in a position of strength to further advance our innovation and market trajectory while delivering even more value to our customers.”
Francisco Partners has invested in more than 300 technology companies since its launch 20 years ago and has more than US$25bn in assets under management.
“The ability to integrate and connect data and workflows across any combination of applications or domains is a critical business capability, and we strongly believe that Boomi is well positioned to help companies of all sizes turn data into their most valuable asset,” said Dipanjan Deb, co-founder and chief executive officer, and Brian Decker, partner, at Francisco Partners
Nehal Raj, partner, and Art Heidrich, principal, at TPG Capital added: “The need for automation and data integration across applications has never been greater. Boomi's cloud-native platform enables enterprises to streamline business processes and is essential for driving digital transformation.”