Canada’s recession was short — and in some regions brutish — but the aftermath will be almost as challenging, three new separate reports on the economy suggest.
The reports from the country’s budget watchdog, Statistics Canada and one of the leading economic think tanks, the Conference Board, are remarkably similar in detailing what Canada lost during the recession and the problems it faces in recovery.
Putting it in economic terms, Statistics Canada concludes the country’s gross domestic product shrank 2.9% last year, slightly more than its original estimate.
But not all regions experienced the recession in the same way. Newfoundland’s economy fell back a massive 10.2%, while two tiny economies, Prince Edward Island and the Yukon, did not contract at all.
Among the bigger provinces, Ontario’s economy shrank 3.1% and Quebec’s by a relatively modest 1%.
In dollar terms, the parliamentary budget office estimates that by 2014, when the economy returns to normal, Canada will have suffered a cumulative total of $225 billion in lost output.
The recession started in the fall of 2008 after the near financial collapse on Wall Street and didn’t end until last summer. Recovery has been spotty, with solid growth in Canada and some other countries but weaker expansion in the United States. Many economists fear it will be a jobless recovery, with continued high levels of unemployment.
Canada’s jobless rate stands at 8.2%, about half a point below its recent high last summer. In the United States, unemployment has eased a bit in recent months, but remains at 9.7%.
By 2014, a different set of challenges will be facing Canadians and their governments, says the Conference Board’s Pedro Antunes.
In a far-reaching outlook, Antunes says 2014 is when the real impact of the retiring baby boom generation will start being felt in Canada’s labour market, economy and government budgets.
The generational squeeze should have happened two years earlier, but the ongoing slack in the economy, a growth of older women entering the workforce and recession-rocked seniors remaining or returning to work, plus immigration, will keep a steady supply of available workers until then.
As a result, Antunes says, Canada’s economy will average relatively robust growth of 3.4% from 2012-2015, a time when the Bank of Canada sees potential annual growth slowing to 1.9%.
The Conference Board sees the recovery taking longer because it believes the economy currently has more of an output gap to close, and because it thinks it will take longer for the U.S. consumer to return to health.
After 2015, Antunes and the bank agree that the economy won’t grow much over 2%.
“Canada’s near-term economic outlook is much brighter than it was just a few months ago,” said Antunes. “Beyond 2014, however, economic growth will be restrained. Labour shortages brought on by a wave of retirements will be the dominant economic trend until about 2030.”
The report builds on the parliamentary budget office’s own work on the issue, with a few differences.
While the budget office saw the federal government facing a growing structural deficit as a result of the aging population and seniors’ growing social and health care needs, the Conference Board thinks it is the provinces that will feel the pinch more acutely.
Provincial deficits will total $37 billion this year, compared to the $56 billion federal shortfall. But while Ottawa will see its finances improve, for the provinces “substantial improvements will be difficult since they face a steady rise in health-care costs — the result of an aging population,” the report states.
As well, the think tank doesn’t think much of efforts to reduce greenhouse gases so far. Without new commitments, it predicts such pollutants will rise from 724 megatonnes in 2007 to 1,080 megatonnes in 2030, a 49% increase.
In fact, the Conference Board says the major effective tool against emissions of late has been not from government action, or industry efficiencies, but from an indirect carbon tax brought on by the appreciation of the price of oil from about $25 a barrel a few years ago to the current $85.
Despite the challenges, Antunes believes Canada’s future should be bright. Strong growth in emerging markets such as China, India and Brazil will keep demand for Canada’s natural resources strong and provide Canadian corporations with trading opportunities, if they make the necessary investments to modernize.
And while immigration along won’t reverse the aging trend, it will help keep Canada’s population growing at about 1% a year, so that by 2030, there will be about 42 million Canadians.
Retirement of baby boomers to slow Canada’s long-term economic growth: Conference Board
Labour shortages will be “dominant economic trend” until 2030
- By: Julian Beltrame
- April 28, 2010 April 28, 2010
- 11:14