Manitobans have good reason to be optimistic as the New Year begins. According to the Canada West Foundation’s latest report, entitled Well-balanced: Manitoba Economic Profile and Forecast, the province is in a good position to weather the current financial storm and its economy is poised to grow faster than the Canadian average. The foundation is forecasting Manitoba’s real gross domestic product (GDP) will be 2.3 per cent this year and two per cent in 2009. The foundation is so gung-ho about Manitoba’s future that it terms the province a “sweet spot” amid economic uncertainty.
“It is striking how Manitoba is currently sitting in an economic sweet spot where prosperity comes from different sources,” said Jacques Marcil, the Canada West Foundation’s senior economist, “none of which dominates enough to upset the economic applecart too much. Manitoba’s steady-as-she-goes growth will spread among different areas of the economy, giving the province a degree of balance that will be the envy of other jurisdictions.”
Actually, the foundation is reinforcing comments made by other economic groups over the years, which have indicated Manitoba is in a better position due to its diversified economy. This diversity means Manitoba has a measure of immunity from the boom and bust cycles that plague so many other provinces, such as Ontario with its heavy reliance on the auto industry. When Canada lost 70,600 jobs in November, according to Statistics Canada, 66,000 of those jobs were in Ontario. Economists are now saying Ontario is ground zero for the growing economic crisis in Canada.
The fastest pace of employment growth so far in 2008 has been in Saskatchewan at 3.2 per cent, Alberta at 2.1 per cent and Manitoba at 1.8 per cent. Manitoba’s unemployment rate in November stood at 4.2 per cent, while the Canadian rate was 6.3 per cent. The Canada West Foundation said Manitoba’s unemployment rate will be second-lowest only to Alberta’s.
Prime Minister Stephen Harper has confirmed that the January 27 federal budget will run a deficit and include billions of dollars in new spending to help resuscitate Canada’s faltering economy. The government has already briefly outlined a $3.4-billion auto industry stimulus package in partnership with the Ontario government.
In a recent CTV interview in Halifax, Harper said he was “very worried about the Canadian economy” — an about-face from his earlier statements on the economy. As a result of his worry, Harper said the Conservative government will “do some spending measures we hadn’t planned on doing.”
No one other than Harper and Finance Minister Jim Flaherty know the details of the January budget, but a number of organizations, ranging from the auto workers’ union to the Conference Board of Canada, said the federal government should provide a massive infusion of cash. The Conference Board has recommended a temporary fiscal stimulus of up to one per cent of GDP, which is approximately $10 billion to $13 billion.
“Action of this magnitude would create a total deficit in fiscal year 2009-10 of $20 billion,” said Glen Hodgson, senior vice-president and senior economist of the Conference Board, “But that is a price worth paying for a faster recovery and a return to consumer and investor confidence.”
Others are calling for a revamping of Employment Insurance (EI), such as expanding benefits coverage. EI is extremely controversial as Canadian workers continually pay into a program which has filled the government’s coffers to the tune of $57 billion — money that goes into general revenues and pays for other government spending. In a recent ruling, the Supreme Court of Canada said the government is under no obligation to return the $53-billion surplus illegally collected, although the former Liberal government set the premium rate rather than Parliament, to Canadian EI contributors.
Still others claim that the government should not run a deficit and allow the economy to run its course.
While Manitoba is a “sweet spot,” the Bank of Canada announced for the first time in early December that the nation’s economy is entering a recession, which triggered the central bank to lower its bank rate to 1.75 per cent, a three per cent drop in the rate from a year ago.
Harper believes the recession will not be as deep in Canada as compared to the rest of the world and Canada will emerge more quickly from the downturn than other nations.
“Canada’s own position remains
relatively strong,” said the prime minister; “we are entering recession much later than everyone else.”
Yet, Harper admitted he had “never seen such uncertainty in terms of looking forward to the future.” Harper said he doesn’t believe Canada will enter a depression such as was experienced in the 1930s. “We’ve learned enough from the 1930s to avoid some of the mistakes that caused a recession in 1929 to become a depression in the 1930s,” he added.
During the Great Depression, the Canadian unemployment rate peaked in 1933 at 27 per cent, and the Canadian GDP fell 43 per cent between 1929 and 1933. During the recession in the early 1980s, the unemployment rate peaked at 12 per cent in Canada.
The Canada West Foundation’s report projected Manitoba’s steady-as-she-goes growth will be the result of: non-residential construction activity remaining high in Manitoba, including large projects such as hydro generation, public works and mining; transportation equipment manufacturing in high gear with solid orders in the aerospace and bus manufacturing industries; Manitoba crop production doing well, with canola volumes expected to set a new record; and the province’s population is growing faster thanks to reversed migratory patterns with Alberta and Ontario, as well as increased international migration.
Manitoba will not escape the recession triggered by the sub-prime meltdown in the U.S. unscathed, but the province will avoid the gloom and doom outside its borders.
According to the Canada West Foundation’s report, there will be real GDP growth in the province into 2009, and that means Manitoba will not be in a recession, which is defined as two quarters of negative growth. As the tortoise in the Aesop’s Fables proved, steady-as-she-goes invariably wins the race.