Prepare for C$ at parity through 2011 - CME

OTTAWA Jan 12 (Reuters) - Manufacturers and exporters should be ready for a Canadian dollar that stays at or slightly above parity with the greenback through 2011, an industry group said on Wednesday.

Canadian Manufacturers and Exporters (CME) President Jayson Myers said he expects the Canadian currency to move between par and around $1.04 this year, but anything much higher would be problematic for companies.

The pressure of the dollar should be offset by stronger customer demand and economic growth, particularly in the United States, Canada's biggest trading partner, said Myers. Overall, the CME forecast that manufacturing, exports and business investment will drive broader economic growth as government spending slows.

"A great deal of this year ahead is going to be based on the recovery of customer demand, but clearly a high dollar puts Canadian products in a much less competitive position," said Myers, speaking on a conference call.

Manufacturers and exporters struggling to recover from the global economic slowdown have been additionally stung by the higher Canadian dollar, which makes goods sold abroad less attractive and eats into profits of companies that get paid in greenbacks.

The Canadian dollar has hovered around parity with the U.S. dollar for several weeks and rallied to a 2-1/2 year high on Wednesday.

Myers also warned that a volatile currency could be harmful for companies.

The risk of pronounced volatility throughout the year would "make it difficult for companies to manage prices and costs in that environment," said Myers.

Finance Minister Jim Flaherty said in a speech earlier on Wednesday that no one should expect a return to the days when the Canadian currency was undervalued. [ID:nN12262031]

The CME, which represents businesses in the manufacturing and export sectors, also forecast corporate tax cuts will help boost the economy and corporate profits, and add jobs over the next two years.

Federal corporate income taxes dropped to 16.5 percent as of the beginning of the year from 18 percent, and are due to fall to 15 percent in 2012. [ID:nN11152840]

The tax cuts, however, have become a political issue in Parliament, with the leader of the main opposition Liberal Party citing them as one reason not to vote for the minority Conservative government's forthcoming budget. [ID:nN12226941]

"Corporate tax cuts when you're in surplus are one thing. Corporate tax cuts when you're in a C$56 billion ($56.6 billion) deficit don't make sense to Canadians. It's that simple," Liberal leader Michael Ignatieff told reporters on Wednesday.

The Conservative government needs the backing of at least one of the three opposition parties to pass the budget. If all three vote against spending plan, the government falls and there will be a new election.

($1=$0.99 Canadian) (Additional reporting by David Ljunggren; editing by Rob Wilson)