True to the provincial licence plate motto, the economic outlook for Manitoba looks “friendly” compared with the rest of the country. The big banks’ economic teams see the province as a leading performer in 2009, and local economists round out the story.
“Manitoba is a slow, steady growth economy,” says Michael Benarroch, chairman of the department of economics at the University of Winnipeg. “If you balance it out over time, we grow slower than the rest of Canada in the big picture. But in these times, slow and steady is pretty good.”
Benarroch notes that employment and provincial gross domestic product never soared as much as they did in Alberta or Saskatchewan during the commodities boom. So, if Manitoba’s economy sees a contraction this year, it won’t experience as steep a drop compared with other provinces. Nor is Manitoba’s economy exposed to a major, troubled industry, as Ontario is with its auto industry.
Agricultural products headline the economic output for Manitoba, but the province also has a little bit of everything else, including commodities nickel, potash and oil production in the southwestern corner of the province, plus a small core of aerospace and transportation manufacturing.
In fact, Manitoba has about 75,000 manufacturing jobs, although most of the goods are shipped south of the border. Boeing Technology Canada, Bristol Aerospace Ltd. and Stand-ard Aero Ltd. maintain plants in the Winnipeg area. New Flyer Industries Ltd, a major North American bus manufacturer that’s headquartered in the city, has strong sales visibility through 2011, because of a recent focus on alternative-fuel engines.
The diversity of Manitoba’s economy, in combination with a small “c” conservative fiscal approach from the long-serving New Democrat government of Gary Doer, means the province looks to be in good fiscal shape heading into a period of slow growth or a recession. The GDP forecast for 2009 ranges from growth of 2.5% from Royal Bank of Canada all the way down to the 0.5% to 1% contraction predicted by Toronto-Dominion Bank.
John McCallum, finance professor at the I.H. Asper School of Business at the University of Manitoba in Winnipeg, agrees with widespread forecasts for leaner times. “We’re looking at a flat to slightly negative economy in 2009,” he says. “It will be weaker in the first half than in the second half, when this infrastructure jazz and the interest rate and money supply [will start] to have an effect.”
McCallum says the broadest risk to the outlook for Manitoba is a familiar one — if the U.S. economic recession deepens into a depression, led by its consumers: “Look out below. U.S. consumer spending accounts for 18% of global GDP. Japan’s GDP — in total, not just the consumer — is about 8%. The Canadian economy is 2.75%.”
As a result, he says, it’s steady as she goes for Manitoba, unless the U.S. economy shows signs of worsening.
In this context, Doer will manage prudently, say several observers. David Rubinoff, senior vice president of international finance with Moody’s Investors Service Inc. in Toronto, says the Manitoba government has shown it can be shrewd when it comes to finances. The province borrowed to fund its pen-sion liabilities last year; although that contributed to the debt level, it was a fiscally sound strategy in the long term. “We anticipate that the 2009 budget is going to be carefully structured,” he adds, “and the government will continue to be very prudent.”
Although the pace doesn’t satisfy everyone, Bennaroch says, the government has been paying down debt gradually and lowering small-business and corporate taxes.
At the same time, local housing construction and consumer spending have hung in through the fourth quarter, notes McCallum. Along with federal infrastructure spending and the usual transfer payments, the province should do well. About 35% of Manitoba’s total revenue arrives in the form of transfer payments, and the province received an additional $160 million last year. But the federal Tories have said that equalization has been frozen for 2009, and a major concern remains the provincial allotment in infrastructure spending, notes Benarroch.
The provincial government recently announced a four-year, $4.7-billion infrastructure program that will support current projects, along with roads and bridges. McCallum notes there’s more on which to work if the province gets its share of any new federal infrastructure spending.
@page_break@The Winnipeg Airports Authority also expects to open its new $585-million terminal building later this year or early in 2010. As the project comes to a close, it is expected to confer a net positive economic impact of $1 billion, including jobs and provincial sales taxes.
Other major infrastructure projects have been underway for several years, including the expansion of the Red River Floodway, a man-made canal that diverts water around highly populated areas when the river floods in the spring. Manitoba Hydro is also completing construction of the city’s largest building, its new 690,000-square-foot headquarters, this year.
Unemployment remains relatively low, and wild swings are not expected. McCallum, a lifetime Winnipegger, says there will be significant layoffs, but not as many as across the country. He says many Manitoban corporations that have survived over the long term are adept at dealing with ongoing disadvantages, such as a relatively tough tax regime and long distances to markets: “Businesses that have run here for years have become pretty good at running a lean operation.” IE
Still toughing it out in Manitoba
A diversified economy and companies accustomed to running lean will help in the downturn
- By: Gavin Adamson
- February 6, 2009 October 28, 2019
- 12:01