Canada Report: Ahead of the Curve in Returning to Pre-Recession Conditions
Sound decision-making by Canadian banks and businesses has resulted in the nation's weathering the global economic downturn better than most and putting it in a position to grow more rapidly.
Steve Stackhouse-Kaelble (Fall 2011)
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Some of Canada's strongest growth can be found in the West, where resources may be king, but numerous advanced sectors also drive the economy. According to the forecasters at the Royal Bank of Canada, Alberta, Saskatchewan, and Manitoba are in line to continue strong economic growth, thanks to solid demand for their products and a healthy wave of investment. Oil sands, in particular, represent a high-growth area; according to CIBC World Markets, Canada's energy sector accounts for about 15 percent of private-sector business investment, and oil sands make up two-fifths of that capital spending in energy.
In Alberta, the economy grew by 3.7 percent in 2010, and economists are anticipating it could hit 4.3 percent in 2011. A lot of that has to do with big-time spending in the oil sands business. RBC Equity Research gauged the 2011 capital budgets of those companies developing oil sands projects and pegged them in the $19 billion range; if that holds, that would be a jump of nearly 50 percent over the previous year. That means non-conventional crude production is on the upswing, and also translates into enviable job growth. And the more people with good jobs, the better things are for other sectors, including retailing.
As promising as resource-based growth is, Alberta is working hard to develop a diversity of industries. For example, earlier this summer the Alberta government joined with Western Economic Diversification Canada, the Western Economic Partnership Agreement, Medtronic Inc., GE Healthcare, the University of Calgary, and others to support an international study having to do with implantable cardioverter defibrillators. The partners are providing $16.8 million to help get the pilot phase off the ground. Also, a $5.5 million Edmonton-based pilot facility is working on production of nanocrystalline cellulose, which is a nano-material made from plants and said to be stronger than steel. "This has the potential to be one of the technologies that literally changes the world," according to Alberta's Minister of Advanced Education and Technology Greg Weadick.
In Saskatchewan, economic growth last year was even higher than that experienced by Alberta, thanks in large part to increased potash production and the 19 percent boost that gave to the mining and oil/gas extraction sector. There's plenty of potential for more growth in the future.just ask the Fraser Institute, which in its 2011 Global Petroleum Survey ranked Saskatchewan as the best place in Canada for oil and gas investment. Agriculture in Saskatchewan is smaller but still important, and it's a good thing mining and extraction are doing so well, because adverse weather conditions have put a damper on the agricultural sector. All in all, though, the economy is healthy and the jobless rate is about as low as it gets in Canada right now, which is fueling strong in-migration. And that, in turn, is pumping up the housing market, where a 6 percent gain in construction activity was in the forecast for 2011.
As in Saskatchewan, Manitoba saw a drop in agricultural production last year but a jump in mining and oil/gas production. This year, the expectation has been for continued oil/gas and mining growth, albeit a bit more moderate. Some gains in manufacturing, which had leveled off in 2010, are also expected. Construction was remarkably healthy through the downturn - activity was up more than 7 percent in 2009, in fact, and nearly as much in 2010. A number of big projects are winding down now, so construction growth is on a more moderate (but still positive) path at this point. Still, more big projects are in the works, according to CIBC, including a major hydro power plant.
Among Western provinces, British Columbia has seen the slowest overall economic pace lately. It has a different mix of business, and a number of its domestic sectors have been sluggish. Mining was good in 2010, but according to RBC was tailing off earlier this year in a wide range of commodities, including coal, copper, lead, zinc, gold, and silver. All of this has meant slower job prospects, which has put the damper on population growth. Still, economists are hopeful, in part because of the successes that British Columbia's exporters are having in such places as China. And one of the country's biggest upcoming hydropower projects could come British Columbia's way. All in all, RBC economists are looking for a modest uptick in the province's economic growth rate next year.
The West may be big, but it's a small world too, when it comes to collaboration and partnership for an improved economy. The provinces work together in a number of ways - and in some cases reach across the border to partner with American states. For example, late last year the governments of British Columbia and Washington State agreed to develop a joint regional marketing plan with the hopes of attracting investment and creating new jobs. And one of the fruits of the New West Partnership, launched not long ago, is an agreement between the energy ministers of Alberta, British Columbia, and Saskatchewan intended to strengthen Canada's position as an energy powerhouse.