Author: Jacques Marcil
In Canada West Foundation’s last economic forecast for Manitoba, we issued a warning about the strength of the Canadian dollar against the US dollar and how it presented difficulties for Manitoba manufacturers and exporters. This danger has now been removed-at a cost. The financial crisis in the US (and by extension, the world), in addition to exacerbating pre-existing signs of recession south of the border, has introduced a great deal of volatility in more markets than a Wall Street analyst can swing a Cartier pen at: currencies, oil, metals, crops, etc. As a result, the Canadian dollar is now back around 80 cents US after hovering at parity earlier this year. One feeling lingers about all this market turmoil: this is not over yet.
The purpose of such an abrupt opening is not to revive bad memories but rather to emphasize that uncertainty will be the “new global normal” for a while. The devil we knew (high dollar, high world prices) has been replaced by one we don’t know that well because its shape is ever-changing: if exchange rates and prices can swing so low in a panic, who says they can’t drop further, or even swing back? Manitoba is just one among hundreds of jurisdictions now facing uncomfortable uncertainty.
How properly equipped is the province in this new context? In two words: pretty well. Manitoba’s economic performance has been very good recently. Many dials on the dashboard indicate positive results so far for 2008: employment is up by 1.8% (or 10,800 jobs, all full-time), retail sales are up 8.7% and inflation is below the national average at 2.2%. Growth is solid in key sectors such as crop production and non-residential construction. Activity is high in a number of innovative manufacturing industries.
In 2007, Manitoba real GDP grew 3.3%, slowing down somewhat from 4.0% in 2006. The growth in 2007 was broadly-based. Personal spending (+5.0%) and capital investment by businesses (+13.7%) were especially strong. By industry, the manufacturing sector showed strength (+5.3%), contributing one-fifth of overall growth, nearly twice its share of the Manitoba economy (Statistics Canada 2008a).
If one ignores outside factors for a minute, it is striking how Manitoba is currently sitting in an economic “sweet spot” where prosperity comes from different sources, none of which dominates enough to upset the economic apple cart too much. There are some large infrastructure projects which are far from being completed: some are private, some are public. Orders for manufactured products are lined up: some for buses, some for airplane parts. While booming Saskatchewan and Newfoundland and Labrador will probably post much stronger growth in 2008 thanks to demand for their key resources, when all is said and done, Manitoba’s steady-as-she-goes growth will undoubtedly be spread among different areas of the economy, giving the province a degree of balance that other, faster-growing jurisdictions may come to envy at some point in the future.
This balance we observe in Manitoba’s diversified economy should help it weather the storms ahead and post growth higher than the Canadian average. The Canada West Foundation is forecasting that Manitoba’s real GDP growth will be 2.3% for 2008 and 2.0% for 2009.