“Loonie Economy”: How CAD Performance Can Shape Canadian Business in 2024

How CAD Performance Can Shape Canadian Business in 2024?

How CAD Performance Can Shape Canadian Business in 2024?

While it may not always feel like it, the Canadian economy did better than expected in 2023. Like every other advanced economy, Canada fought the dual specters of high inflation and rising interest rates, and that naturally was going to leave some financial scars on businesses and individuals. Yet, some metrics show that Canada did quite well. Indeed, one comprehensive study by The Economist ranked Canada as the 6th best performer out of 35 advanced economies in 2023. The study looked at wider factors than GDP growth alone, but it painted a brighter-than-expected picture for Canada last year.

Yet, as we march steadily through 2024, economists have warned that expectations should remain tempered, even subdued. Many believe that a hard landing from those interest rate hikes, particularly for mortgage holders, may loom this year, even if the Bank of Canada decides to cut rates sooner rather than later. Indeed, towards the end of 2023, forecasters began to send out warnings for 2024, suggesting a cooling off of the Canadian economy and perhaps even a technical recession in the late spring.

How CAD Performance Can Shape Canadian Business in 2024?

However, it is interesting to look at this from the point of view of the Canadian dollar. The underperformance of the Canadian economy could impact the Loonie, but that is not necessarily a bad thing.

Consider the following statement from the Business Development Bank of Canada:

The U.S. will likely continue to grow faster than other major economies. As a result, the U.S. dollar will remain strong against most other currencies, including the Canadian dollar. The Canadian dollar will stay in the 72 to 75 cents range in 2024. A weaker Loonie could make Canadian exports cheaper. It also makes us more attractive to tourists.

Now, by all means, it is not a given that CAD will decline against USD or any other major currency in 2024. Those trading forex markets will be well aware of the complexities that will shape the Loonie’s fortunes this year. Yet, if we take it as something that will happen, an underperforming by the Canadian dollar could help certain Canadian businesses in 2024, particularly exporters and the tourist sector. Let’s take a look at how those two could benefit:


Exports were badly hit in 2023 after a record year in 2022. The latest data from the Canadian Government’s State of Trade report pointed to a decline of around 5.4% in exports compared to 2022. Canada’s main exports, including oil, gold, petroleum, cars, and wood products, can be aided by a cheaper Canadian dollar. Canada’s exports peaked as a percentage of GDP in 2000, when it reached 44.21%. A weakened Loonie may kick-start that growth again.



A lot of global tourism statistics are somewhat skewed due to the hangover of the COVID-19 pandemic. For instance, it sounds impressive that tourist arrivals were up 54% in 2023 compared to 2022, yet there is a huge caveat there, and it is arguably better to compare them to 2019, which shows that they are still down.

Yet, a weaker Loonie can attract more international arrivals, who can get more bang for their buck. In particular, a strong USD coupled with a weak CAD may attract tourists and day-tripping shoppers from the United States. Hotel prices, which have seen steep rises globally, are increasingly seen as a deal-breaker in tourist destination choices, so this, too, could be a benefit of a weakened CAD.

The Downside

Of course, there is a flip side to the coin. Canadians import a lot of fruits and vegetables and other products like clothing. A weaker Loonie may lead to higher prices at the checkout and tightening family budgets. Furthermore, we may encounter a vicious circle scenario where the weakening of CAD feeds into more weakness in the Canadian economy, which, in turn, puts more pressure on the Loonie.

Conclusion: Nothing Is Set in Stone

As mentioned previously, we should not take it as a given that CAD will weaken in 2024. Forecasters are often wrong, and many of the world’s best economists got it wrong about Canada’s economic performance in 2023.

What’s more, many of the challenges facing Canada are being faced elsewhere, including the impending shock from central bank interest rates. That said, there could be many benefits for Canadian businesses if the Loonie weakens across the next 12 months, and it could end up being the catalyst for economic recovery.

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