About Western Canada

Western Canada has a resource driven economy. Although differences exist among the four western provinces in terms of economic structures, one key similarity is prevalent: economic performances in these regions are heavily dependent on commodities and natural resources, which include agriculture, forestry, mining and oil and gas. Compared to the rest of Canada (ROC), the West's economic output from the resource sector accounts for a much higher component of the total GDP (see Figure 1). For example, in 2007, 15% of the regions' GDP was produced by the resource sector, comparing to 3% for the rest of the country.

In British Columbia, the forestry industry is at the forefront of the economic landscape. In Alberta, oil and gas production dominates the province's economy. Saskatchewan's mix of potash mining, oil extraction, and agriculture industries leads its growth. Manitoba's wide range of mining, agricultural and manufacturing products form its economic foundation.

Western Canada's economy is also largely dependant on trade, with approximately one third of its total GDP derived from exports. The largest trading partner is the US, accounting for about 80% of the regions' total exports.

Strong economic growth has created tremendous opportunities for industries such as manufacturing, industrial and residential construction, science and technology innovation, and services throughout the regions.Western Canada has been taking advantage of these opportunities and working hard to build stronger economic foundations and maintain its competitiveness in the global market.

Western Canada's Economic Outlook

Canada's real GDP growth in 2008 slowed to 0.5%, from 2.7% in 2007. Private sector forecasters predict the economy will contract between -2.4% and -0.5% in 2009 ¹ . The current global economic downturn has undermined the nation's economic performance with no province being sheltered from the slowdown.

Before the slowdown hit the global economy in the second half of 2008, Western Canada had been riding on favourable market and economic conditions for a few years. High commodity prices, thriving consumer spending and strong demand for exports had led to impressive economic growth in the four western provinces. For 2007, real GDP growth was recorded as 3.0% for British Columbia, 3.1% for Alberta, 2.5% for Saskatchewan, and 3.3% for Manitoba. The current crisis, however, has seriously affected the economic performance of the region in 2008, with growth rates estimated to be much slower. The West's dependence on natural resources and the US market leaves it particularly vulnerable to external factors.

In Western Canada, a number of causes contribute to a weakened short-term economic outlook including: low and volatile commodity prices; decreased export demand for goods and products; record low consumer confidence, declining capital investment intentions, and a more pessimistic outlook for the US economy. Perhaps most directly is the effect of falling commodity prices on the domestic economy in the West, as high energy and resource prices have been the source of strong income gains for the past few years.

For 2009, British Columbia's economy is expected to experience contraction due to weak demand in both retail and export markets and weaknesses in the forestry, manufacturing, mining and construction sectors. Although the Vancouver 2010 Winter Olympics and the Federal Economic Action Plan will provide boosts, the economic contraction rate will likely still be in the range of -2.3% to -0.1%.

After slower growth in 2008, the economic outlook for Alberta remains uncertain in 2009. Many oil sands projects and investments are either canceled or delayed due to falling oil prices. Housing prices have receded and significant job losses have been reported. Forecasters suggest that Alberta will be among the Canadian provinces experiencing the sharpest declines in 2009, and predict a recession rate between -2.5% at the low end to -0.5% at the high end.

For Saskatchewan, the economy is expected to remain on relatively stable ground and to outpace all Canadian provinces in 2009, after leading the nation in growth in 2008. Real GDP growth is expected to reach as low as 0% to as high as 1.6%. While commodity price decreases will slow growth, the medium-term outlook is still favourable for potash, uranium, and energy industries.;

A more diversified economy is helping Manitoba be better prepared for the current economic situation. Robust demand for transportation equipment, in particular for aerospace parts and transit buses, brings positive prospect to the manufacturing sector in spite of the sluggish demand south of the border and challenging economic conditions globally. As thus, the private sector's outlook for the province is divided, ranging between a pessimistic -1.3% contraction to an optimistic 1.0% growth in 2009.

GDP from Resources as % of total GDP

Compared to the rest of Canada (ROC), the West’s economic output from the resource sector accounts for a much higher component of the total GDP (see Figure 1). For example, in 2007, 15% of the regions’ GDP was produced by the resource sector, comparing to 3% for the rest of the country.

Figure 1 - Text version

	1997	1998	1999	2000	2001	2002	2003	2004	2005	2006	2007
West	15.1%	15.0%	14.6%	14.0%	13.2%	12.7%	13.0%	13.0%	12.8%	12.3%	14.9%
Canada	6.6%	6.6%	6.4%	6.2%	6.0%	5.8%	6.0%	6.0%	5.9%	5.8%	6.9%
ROC	2.6%	2.7%	2.7%	2.6%	2.6%	2.7%	2.6%	2.6%	2.5%	2.5%	2.9%

Over the long term, diversification of the western economy is the key to sustained economic success. A number of structural issues need to be addressed to ensure a more resilient western economy, including:

• Ongoing reliance on the resource sector and exposure to volatile commodity markets;
• Low business expenditures on research and development (R&D) resulting in fewer technologies being commercialized;
• Lack of access to early stage capital to facilitate company start-up and growth;
• Need for improvements in the area of business productivity and competitiveness;
• Larger proportion of SMEs, but fewer who export, and research indicates exporters outperform non-exporters;
• The aging population and workforce, and;
• Low participation rate of Aboriginal labour force.

Addressing these issues is vital to ensuring a more competitive and diversified economy in Western Canada in the long run.

Sources:
Conference Board of Canada
Statistics Canada
Canada West Foundation's State of the West 2008
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¹ Private sector forecasters of provincial GDP growth include Conference Board of Canada, Bank of Montreal, Royal Bank of Canada, Scotiabank and TD Economics.