Source: The Canadian Press

Debt rating agency DBRS Ltd. says it expects most sectors of Canada’s economy will experience a relatively stable and positive year in 2011, with forestry being a notable exception.

The company provides investors with ratings and estimates of creditworthiness of companies, governments and other public-sector organizations that raise money by issuing bonds and other types of debt.

“DBRS expects the downgrade-to-upgrade ratio to be below the historical average in 2011 and default levels to remain low,” the corporate credit rating agency said in a release late Wednesday.

The firm projects that the auto and utilities sectors will likely stand out in 2011.

The agency upgraded its outlook for the auto sector from neutral in 2010 to positive this year, with much of the growth is expected to come from emerging markets.

However, overall corporate earnings growth for Canadian companies could be offset by a weak performance in the forestry sector, the report said.

DBRS doesn’t expect a meaningful recovery for lumber, paper and pulp producers until late 2011 as a strong Canadian dollar pressures forestry exports.

“Even though construction activities are expected to stay weak as a result of an ongoing depressed housing sector, increasing exports to China would support a modest growth in demand for lumber,” it said in the report.

Longer term concerns include non-corporate debt levels and higher energy and commodity prices that could raise inflation, interest rates and base costs.

“High debt at both the government and consumer levels remains our number one concern and will not be easily or quickly corrected,” said Peter Schroeder, the firm’s managing director of corporate data and research for Canada.