Faculty experts present economic predictions for troubled year ahead
December 04, 2008 – KINGSTON, ON – Queen’s School of Business professors made their economic predictions for 2009 at the 27th annual Business Forecast Lunch today in Kingston, Ontario. An expert panel of faculty presented the economy’s prospects with a focus on their own particular expertise, including a review of the 2008 forecast.
Overall, the economy will continue to falter in 2009: unemployment will rise, markets will remain volatile and policy makers will be active in combating the slump. Canada is expected to weather the economic storm slightly better than other countries. Kingston is not immune to the financial crisis; however, recent research conducted by Queen’s reveals some growth opportunities for the city. A summary of the panel’s specific forecast is included below.
Macroeconomic outlook
Economics Professor and Business Forecast Lunch moderator, John McHale, reported on the macroeconomic outlook, touching on issues such as unemployment, inflationary pressures, market volatility and slumping economic activity.
He predicts that Canada will fall into recession, with the economy contracting in the last quarter of 2008 through the first quarter of 2009. To fight slumping economic activity, however, the Bank of Canada will lower the target for the overnight interest rate by half a percentage point over the course of the year.
Driven by volatile commodity markets, Professor McHale says we can expect a volatile dollar. But, as oil prices recoup some of their dramatic recent losses, the overall trend should be towards appreciation. Contrary to government projections, the Federal budget will fall into deficit even without a stimulus package. The government will be forced to implement a stimulus package early in the new year as economic conditions deteriorate.
“2009 will be a difficult year for the Kingston economy,” said Professor McHale. “Unemployment rates will rise and declining consumer confidence, tight credit conditions and cutbacks in health and education will be a drag on local growth.”
“That said, the inflow of new residents to Kingston – not least its students – represents a growth opportunity for the city, provided it improves its capacity to retain top talent.”
Financial markets
From a financial markets perspective, Finance Professor Lynnette Purda notes that while 2008 was clearly a tough year for stock markets around the globe, the Toronto Stock Exchange managed to perform better than many of its international counterparts including New York and Tokyo.
“It’s doubtful that markets have hit bottom yet, but many are expecting equity performance to improve in the second half of 2009,” says Professor Purda.
Canada is expected to fair slightly better than other countries. It is the only advanced economy forecast to have positive GDP growth, albeit small, by the International Monetary Fund in the upcoming year. As a result, investors may benefit from making purchases of large cap stocks at their current discounted values prior to any improvement in late 2009. Professor Purda advises caution, however, when purchasing stocks from emerging markets and those in export-intensive industries.
Strategic outlook
From a managerial perspective, Professor of Strategy Douglas Reid reports that Canadians should recognize that the recession is affecting everyone worldwide, and does so through creating threats to confidence due to rising uncertainty.
“Think of this as a challenge to the customer’s ‘willingness to pay,’ says Professor Reid. “According to a new study from McKinsey, there is a strong view in North America that the recession will last through 2009, hence, businesses should see ‘09 as a building year for a 2010 recovery and, in many respects, behave like a startup –- conserve cash, innovate rapidly and at low cost, simplify, and hold onto valuable resources, human and otherwise.”
The coming year is an especially good time for acquisition for those companies who can obtain financing. It should also be a prime opportunity for companies to readjust their business model -– decouple from the past, revisit segmentation and create simplicity. Professor Reid also recommends that management teams remove buy-barriers, fatten their supply chain, focus on voice-of-the-consumer innovation and communicate both progress and obstacles clearly with all stakeholders.
Local challenges and opportunities
In 2008, a Queen’s University team conducted research to assist the Kingston Economic Development Corporation (KEDCO) in improving the retention of knowledge workers, specifically Queen’s University graduates, in the greater Kingston area. Dr. Yolande Chan, Professor of MIS and Director of the Monieson Centre at Queen’s School of Business, presented the results of this survey at the luncheon.
The research examined how information about local job opportunities and student availability is circulated and looked at the talent-based or creative economy opportunities available for Queen’s graduates. It also explored knowledge worker recruitment and retention, including the motivation of the Net or Millennial Generation employees and what matters to Queen’s graduates.
The survey was conducted online with 900 third and fourth year undergraduates and graduate students, as well as 3,000 Queen’s alumni.
Key results of the research are:
• Employment prospects are critical to retaining students locally.
• Students are more likely to stay in Kingston for summer jobs and post graduate employment if they feel they are part of the community.
• Students and alumni both indicated that employment prospects were the most important factor in deciding where to live post graduation.
• Students and alumni both expressed strong dissatisfaction with Kingston’s employment opportunities.
• Students and alumni both indicated “sales & service” was their least desired type of employment and they perceived sales & service to be the largest type of employment in Kingston.
Professor Chan reported that in terms of an attraction and retention strategy, the City of Kingston needs to focus on developing employment prospects to strengthen its employment base.
Kingston should also implement policies that generate new economic opportunities in several key areas including health, research, social sciences (education, government, religion), natural and applied sciences, art, culture, recreation, sports, business and finance.
The City should also work to foster integration of students into the Kingston community. Some specific recommendations in this area include:
• Avoid hypercritical responses to student issues as they alienate a valuable economic resource.
• Improve city services in student residential areas.
• Continue to improve high level Queen’s-City relations.
• Strengthen promotion of Kingston – “internal tourism.”
Employers should promote their business/industry to Queen’s students by recruiting on campus and providing summer internships and post graduate training opportunities to Queen’s students.
Kingston employers should also be looking locally to complete globally by taking advantage of the consulting and research services the Queen’s community offers to help grow their businesses.
The Business Forecast Lunch was founded 27 years ago by Queen’s School of Business professor emeritus Merv Daub to establish an important link between the School and the Kingston business community. The sold-out event is hosted by Dean David Saunders.
About Queen’s School of Business
Queen’s School of Business is one of the world’s premier business schools — renowned for exceptional programs, outstanding faculty and research, and the quality of its graduates. Canadian executives regard Queen’s as Canada’s most innovative business school, offering students academic excellence and a superior overall experience. Queen’s School of Business — where Canada’s first Commerce program was launched in 1919 — is located at Queen’s University in Kingston, Ontario. The School also delivers programs at locations across Canada, as well in the U.S. and the United Arab Emirates.
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Visit http://business.queensu.ca/news/docs/BFL2009.pdf to view the Business Forecast Lunch presentation.
For more information, please contact:
Amber Wallace
Queen’s School of Business
613-533-3151 / awallace@business.queensu.ca
