TORONTO (miningweekly.com) – The very strong economic performance in specific resource-intensive jurisdictions in Canada, especially Alberta and Saskatchewan, are mainly responsible for Canada’s comparatively strong overall economic record relative to the US since the recession of 2008/09, a new report by the influential Fraser Institute has found.
In its report titled ‘Comparing recent economic performance in Canada and the United States: A provincial and state-level analysis’, published on Thursday, the institute took a closer look at the sub-national statistics north and south of the world’s longest border, and found that the very strong performance of Alberta and Saskatchewan pulled up Canada’s national average, and masked economic weakness elsewhere in the country.
The sub-national data from the US told a similar story; resource-intensive states generally showed much stronger performance than other states.
However, for Canada as a whole, the resource sector made up a substantially larger share of total economic output (14.2%) than that of the US (5.9%). The result was that the strong growth rates in Canada’s high-performing, resource-intensive jurisdictions raised the national average much more than was the case south of the border, where the resource-intensive jurisdictions represented a comparatively small share of economic output.
Given the marked economic slowdown under way in Canada’s resource-intensive provinces, owing to depressed commodity prices, there were important implications for Canada’s future growth prospects. The resource boom, with its associated output, employment generation and capital formation, had come to a halt; at the same time, relatively weak growth in central and Atlantic Canada persisted despite lower commodity prices and a lower Canadian dollar.
The report demonstrated that while Canada’s overall economic performance might have been comparatively strong in recent years, specific regions and individual provinces had, in fact, struggled.
Overall, Canada as a whole had performed better economically on various economic measures than the US had since the recession of 2008/9. However, there was substantial variation in the economic performance of sub-national jurisdictions, including provinces and states within each of the two countries. By focusing only on national statistics, important regional and provincial or state level differences and trends could be overlooked, the institute advised.
CANADIAN CAVEAT
According to the Fraser Institute, the conventional wisdom regarding Canada’s performance in the post-2009 period asserted that Canada weathered the global financial crisis and recession well and had the best performance of the G-7 countries.
All the evidence comparing economic output, employment, and productivity in Canada and the US since 2009 suggested that Canada performed better.
The average annual real per-capita gross domestic product (GDP) growth from 2010 to 2014 was 1.4% in Canada and 1.2% in the US, while real GDP per worker grew at 1.3% in Canada and 0.8% in the US. Total employment growth in Canada averaged 1.3% versus 1.2% in the US, while the average unemployment rate was 6.4% in Canada versus 8% in the US.
“Given the marked economic slowdown now under way in Canada’s resource-dependent provinces due to depressed commodity prices, the fundamental question is which provinces and regions will propel Canada’s future economic growth? This is especially concerning if the anaemic economic performance in central Canada and Atlantic Canada persists,” the institute stated.
The resource boom, with its associated output and employment generation and capital formation was currently over. Central Canada and the Maritimes had yet to see their economies spurred despite commodity prices and the Canadian dollar both being lower.
According to the institute, it remained to be seen where the future impetus would come for the Canadian economy.
Besides, while sound economic policy was important for all of Canada, it was particularly critical east of Manitoba, where provinces had pursued fiscal policies in recent years that were damaging to future growth prospects.
Fraser singled out Ontario in particular for having taken on a massive debt burden at a time of high economic uncertainty, sluggish growth and severely depressed commodity prices.
Likewise, the federal government was also substantially increasing its deficit financing.
“In general, these governments, along with Alberta, are engaged in deficit spending, increasing government debt, and higher taxes. Such fiscal paths will only unsettle business and investor confidence at a time when productivity-boosting private sector investment in the economy is needed,” the institute warned.