a sharp decline over five months. in our july mpr we advanced what we viewed as a conservative forecast for exports, in the sense that it assumed only that exports would grow roughly in line with the us economy. we have seen a significant recovery in exports since then, but the net effect of these choppy data is that the level of exports is well below where we thought it would be by now. it is true that international trade has been surprisingly weak globally, and we offer a box in this mpr discussing a range of interpretations. also, the us economy was quite weak in the first half of the year in dimensions that are important to canadian export demand. these factors explain about half of the shortfall in exports relative to what we were expecting. for the remainder, we are looking at a range of structural factors, including lost export capacity and competitiveness challenges. in our surveys, companies have mentioned a number of factors that can influence competitiveness or hinder exports directly. these include deficient infrastructure, regulatory uncertainty, rising trade barriers, relatively high electricity costs and the unknown status of current and future trade agreements. 1 / 3 bis central bankers'speeches this analysis suggests that more of our export shortfall may be structural than previously believed, rather than cyclical. this is what led us to indicate in our september decision that the risks around our july inflation projection were tilted to the downside. our latest projections incorporate a permanent shortfall in exports relative to our understanding of fundamentals in order to rebalance our forecast risks, reducing the projected level of gdp by about 0. 6 per cent by the end of 2018 compared with our july projection. such a reduction in our outlook for exports may sound odd, given the depreciation of the canadian dollar against the us dollar. however, some of our competitors have also seen large depreciations in their currencies. for example, the mexican peso has fallen by more than 30 per cent against the us dollar since mid - 2014, while the canadian dollar has slid by less than 20 per cent over the same period. so while the exchange rate will continue to support the current level of canadian exports, most of its impact on export growth has probably already taken place. the export weakness is expected to lead to somewhat softer business investment. however, there are signs that the worst may be behind us in terms of investment. our most recent survey of canadian companies found that many businesses believe resource - related activity may be near a low point. resource

cautious and gradual approach when entering uncharted territory — but as the pandemic has illustrated, there are times when policy - makers must act boldly. any policy involves risk, but inaction is often riskier. it ’ s important to take those risks, but it ’ s equally important to fully understand them and be transparent in communicating their nature. 4 when coming to a policy decision, the bank looks at several risks and assesses their relative importance. many risks are two - sided, but we may be more concerned about one side than the other. this has been particularly true during the pandemic. given the magnitude of the impact at the beginning of the crisis, our concern about of the downside risks to the economy led us to deliver an aggressive monetary policy stimulus. as the situation evolved, however, our policy action shifted along with the balance of risks. currently, with inflation well above our target, we are increasingly focused on countering the upside risks. at different stages in the pandemic we have changed our outlook and our policy stance to respond to the uncertain and fast - changing situation. what remained constant, see s. kozicki and j. vardy, “ communicating uncertainty in monetary policy, ” bank of canada staff discussion paper no. 2017 - 14 ( november 2017 ). however, was our commitment to explaining the basis for our projections and our decisions. we have been clear that we can ’ t be certain about many things. we have also been candid in describing the risks involved at any given moment. although we cannot eliminate uncertainty, we can provide as much clarity as possible about the bank ’ s actions and decision - making processes. this was clearly reflected in the conditions we included in our forward guidance throughout the pandemic. and it was in that spirit that we announced our decision in january, making it clear that with slack now absorbed, interest rates will need to be on a rising path to bring inflation sustainably back to the 2 % target. conclusion the pandemic has brought much that was unexpected. we have drawn on our analysis and experience to reach a clearer understanding of the forces at work, but we must anticipate the possibility of more surprises before this chapter is closed. while we now expect supply disruptions to ease and inflation to come down quickly in the second half of this year, we are alert to the risk that inflation may again prove more persistent. we will be nimble — and if necessary, forceful — in using