Ontario and B.C. shouldn’t get too smug: Alberta may have lost its economic might thanks to falling oil prices, but some economists say the province, alongside neighbouring Saskatchewan, will get its groove back in the not-too-distant future.
“West is still best,” says the headline of a TD Economics report, which says Alberta and Saskatchewan “still have the edge,” from a long-term economic growth perspective.
When oil prices do eventually recover, which TD says isn’t too far away, the young and growing populations in the two provinces will play a big role in increasing Canada’s productivity, and in turn economic growth.
“Much hay has been made about the fall from grace of Canada’s seemingly perennial growth leaders, Alberta and Saskatchewan, who have been replaced at the upper end of the leaderboard by oil-importing regions such as Ontario and British Columbia, “ TD economists Randall Bartlett, Jonathan Bendiner and Admir Kolaj write in their report.
“Our long-term view has not been altered by recent events in the global oil market. The West will again be the best.”
The conclusion provides some optimism during what has been a bleak few months for people in oil-rich regions such as Alberta, Saskatchewan and Newfoundland and Labrador. In Alberta especially, mass layoffs and forecast of a deep provincial deficit are eroding confidence.
Economists have been calling for a reversal of geographic fortunes, where provinces like Ontario and B.C. become the new economic drivers now that the lower Canadian dollar is making their export industries more attractive.
In its latest provincial economic forecast, TD forecasts Ontario will lead the country in economic growth over the next two years, followed by B.C. and Manitoba. Meantime, the three oil-producing provinces will see the least growth.
“While these trends are likely to carry into 2016, a longer-term view suggests that this changing of the guard will likely represent more of a pause than the start of a new era,” TD economists say.
“Barring a long, protracted bear market in commodity prices (which we don’t expect), the economic momentum next year is likely to begin shifting gradually back to those regions that enjoy stronger longer-term growth dynamics – notably the recent high-flying Prairie provinces.”
The one drag on the overall Canadian economy is expected to be the aging Baby Boom population, which will put pressure on government spending and a drag on productivity as large numbers of experienced workers continue to exit the workplace.
“An aging population and weak economic growth are expected to weigh on increases in living standards, as well as investment opportunities and business profits,” TD economists say.
“Demographic challenges are more acute in regions east of Ontario. As such, the rate of economic expansion in these provinces is forecast to record a more marked slowdown vis-à-vis the rest of Canada.”
Still, the economists say, “No province will be fully immune.”
TD calls for governments to be proactive through policies that help to increase labour force participation and immigration. The economists’ forecast that, based on current trends, the long-term immigration rate will only rise slightly by 2025 to 7.5 out of every 1,000 persons, up from 7.4 in 2013.
Companies should also do their part to help drive growth.
“Firms can invest to increase productivity while governments can provide a business friendly climate for investment,” TD says.