The Conference Board of Canada says businesses need to redouble their efforts to innovate and diversify their sales if they are to remain globally competitive amid the economic turmoil in the United States.

The board says the economic outlook for Canada is generally positive, but the U.S. may be in the midst of a lost decade.

There is no pain-free way for the U.S. government to deal with its deficit estimated at more than $1.3 trillion a year, the board says.

However the Canadian economy appears on track and short-term interest rates are expected to rise, which will put upward pressure on the loonie and hurt companies that depend on U.S. markets.

Roughly 70 per cent of Canadian exports go to the United States.

The automotive and forestry sectors in Ontario and British Columbia are also expected to remain sluggish as mediocre U.S. growth will weigh them down.