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Regular short commentaries from our economics team.

Canada’s New Economic Powerhouse

Mario Lefebvre
Director
Centre for Municipal Studies

Let me tell you one of the most incredible Canadian economic success stories of the past decade. I like to think that the economists of The Conference Board of Canada have an enviable reputation. Yet, if any one of us had predicted what could potentially unfold in 2009, I strongly believe that our credibility would have been under serious attack.

Here’s the story: it is more than likely that in 2009, only two Canadian provinces will post positive economic growth. Only two out of all ten. Go ahead, make a guess. Are you thinking that Alberta must be one of the two? No—think again. British Columbia? No—wrong as well. The two growth leaders are: Manitoba and Saskatchewan!

Now before I go on, let me assure you of one thing: I love these two provinces! Every year, I have the opportunity to go west and give speeches in Regina, Saskatoon and Winnipeg, and I always have a lot of fun doing it. But that being said, picture the following: I am standing in a room giving a speech—let’s say in 2007. December, 2007 to be precise. In my speech, I am discussing the economic forecast for both 2008 and 2009. How would you have reacted if I would have said that in 2009, of all the Canadian provinces, only Manitoba and Saskatchewan will post positive economic growth? I don’t think you or anyone would have believed me. Now imagine that you would have heard me make that same prediction for 2009, but back in 2004? Or a decade ago, in 1999? Had I done that, my credibility would have probably been shattered and I would not have the luxury of making speeches across the country anymore.

How things can change in so little time. Alberta, which looked immune to any economic downturn not so long ago, now has to deal with a severe contraction in energy investment and the implications for the economy as a whole. Ontario, Quebec and the Atlantic provinces are battling the effects of a struggling manufacturing sector and are being dragged down by the U.S. recession. Nowhere is it more true than in Ontario, where the automobile and parts industry is taking some serious blows.

But hold on there. The Manitoba and Saskatchewan story is worth applauding. This is not a case of every other provinces sinking, but them! Not at all. Their relative success in 2009 has been earned and is well deserved. As Director of the Conference Board’s Centre for Municipal Studies, I have been keeping a close eye on the economic situation of Regina, Saskatoon and Winnipeg. And what is about to unfold this year is no luck. These three cities have been posting solid economic performances for years now. And if you are thinking that this has to do with agriculture, you could not be more wrong. These three economies have diversified significantly over the past 20 years and while agriculture still matters, it plays much less of a role in the overall economic picture.

For your humble servant, the success of these three cities certainly is not a new story. The Conference Board recognized years ago that something special was taking place in the economy of these three cities. And now, the country as a whole is noticing. In fact, the economic success of these cities has turned them into a magnet for people over the past two years. This is such a huge change. Historically, no matter how well the economies of Winnipeg, Regina and Saskatoon were doing, these cities were losing people to other provinces. Yet over the past few years, these cities have been attracting people from other provinces. This is a change in trend which bodes well for the future economic prosperity of these cities, as stronger population growth is guaranteed to lift demand for new homes and the number of shoppers inside these cities’ shopping malls.

True, a rebound will eventually take place in all other Canadian provinces over the next few years. But I do believe that Manitoba and Saskatchewan will continue to perform well, remaining near the top of the growth leaders over the short- and medium term.