Operating Context and Key Risks
Operating context
Global economic growth is projected to be a healthy 3.7 percent in 2017 and 3.9 percent in 2018, with emerging markets and developing economies continuing to lead the way. The Canadian economy has also been very strong, growing at a pace well above that of all other G7 countries at 3.2 percent since mid-2016i, however this growth is expected to slow in 2018 (2.2%) and 2019 (1.6%).ii
Western Canada accounts for nearly one-third of Canada's population and 37 percent of Canada's economy. Over the past decade, the west has led all other regions in growth, even as it has faced significant challenges, including low commodity prices. Following two years of recession, the region has entered a phase of economic recovery. The western provinces have diverse industry compositions and as a result have very different short-term economic growth outlooks. These differences are based on economic momentum and risks that exist in their particular areas of economic strength.
British Columbia and Alberta are forecast to have stronger economic growth, while the economies in Saskatchewan and Manitoba are expected to perform more modestly. Alberta's economy is forecast to have the strongest growth of any province in 2017, at 4.5 percent; slowing to 2.4 percent in 2018 and 2.0 percent in 2019. Saskatchewan's economy is also projected to grow, although more modestly, at 1.9 percent in 2017, 2.0 percent in 2018, and 1.9 percent in 2019. BC is expected to have relatively strong growth, although at slower than recent rates, with real GDP growth projected to be around 3.3 percent in 2017, slowing to 2.6 percent in 2018 and 1.8 percent in 2019, with much of the activity occurring in the lower mainland. Manitoba, the least resource-dependent western province, is forecast to experience robust economic growth of 2.4 percent in 2017, but ease to 2.0 percent in 2018 and 1.6 percent in 2019, as construction slows and mines close.iii
Other challenges for the western Canadian economy include:
- Changing dynamics in trade relationships;
- Low business investment in research and development compared to national and international rates;iv and
- Persistent socio-economic gaps for under-represented groups, in particular Indigenous people, women, and youth.
With analysts expecting a measured commodity price recovery moving forward, continued economic success in western Canada will require adopting innovative approaches to build on regional strengths and embrace new economic opportunities.
Regional Strengths and New Economic Opportunities
The west has demonstrated industry expertise and capabilities in the innovation and technology sectors. Western Canada plays an important role within the Canadian ecosystem, including in clean technology, natural resources, information and communication technology, life and health sciences, advanced manufacturing, and agriculture and agri-food. Fostering innovation clusters represents an important opportunity to diversify and strengthen the western Canadian economy.
Over 55 percent of Indigenous Canadians live in Western Canada.v The Indigenous population is amongst the youngest and fastest-growing demographic, representing a significant opportunity to grow the labour force in Canada. Currently, Indigenous peoples' labour market outcomes and educational attainment trail those of the non-Indigenous population by a significant margin. Over the next 10 years, approximately 400,000 Indigenous Canadians will reach an age to enter the labour market. In addition, Indigenous small business is growing six times faster than in the non-Indigenous market according to private-sector analysis, creating an enormous potential for Indigenous business growth in Western Canada.vi
Women have accounted for 30 percent of employment growth in the science, technology, engineering, and mathematics (STEM) fields, but still represent less than a quarter of employment in STEM related occupations.vii Enhancing the participation of women in these fields would promote diversity in the workforce, contribute to narrowing the overall gender wage gap, and help alleviate pressure related to the growing demand for skilled labour that is necessary to succeed in an increasingly innovative economy.
There is a higher proportion of high-growth small and medium-sized enterprises (SMEs) (10.1 percent) in western Canada than in the rest of Canada (8.8 percent), led by Alberta and Saskatchewan.viii Continuing to develop firms with high-growth potential is crucial for ensuring continued success of the western Canadian economy. Key challenges for high-growth and innovative firms include: access to talent, management skills, access to capital, access to markets, and being able to take advantage of innovation ecosystems.
The integration of skilled immigrant workers also represents an important opportunity to increase labour force capacity and improve economic outcomes. Western Canada attracted nearly 120,000 immigrants in 2016, accounting for about 40 percent of Canada's international immigration.ix There continue to be barriers for firms to bring in skilled workers and managers from abroad that limit growth potential and place western Canadian firms at a disadvantage relative to their international competitors.
Other opportunities for the west include:
- Proximity and growing trade relationships with emerging markets in the Pacific Rim;
- A robust ecosystem of businesses, entrepreneurship, post-secondary training and research and development institutions; and
- A well-educated workforce, with nearly 65% of western Canadians between the ages of 24 and 54 having post-secondary education.
Key Risks
| Risks | Risk response strategy | Link to the Department's Core Responsibility | Link to mandate letter commitments or to government-wide and departmental priorities |
|---|---|---|---|
| Difficult economic conditions inhibit our partners' ability to contribute to projects. |
To manage this risk WD will:
|
Economic development in western Canada | Innovation and Skills Plan |
| Changes in the economy undermine the growth potential of WD's chosen clusters and inclusive groups such as Indigenous people, women, and youth. |
To manage this risk WD will:
|
Economic development in western Canada | Innovation and Skills Plan |
Changing economic conditions in 2018-19 may reduce the revenues of WD's partners in other governments, the not-for-profit sector, and the private sector. This may in turn lead to reduced partner co-investment in projects aimed at growing clusters and promoting inclusive economic growth. To mitigate this risk, WD will conduct analytical research and collaborate with its partners to assess which projects have the greatest potential to achieve desired results and advance shared priorities. This will help WD and its partners maximize the value of funding available for investment.
Changing economic conditions could also limit the potential for growth in the sectors that WD supports through its cluster priority, and could limit the potential for improvement in economic outcomes for the under-represented demographic groups that WD supports through its inclusiveness priority. To mitigate this risk, WD will conduct analytical research and collaborate with its partners to stay current on the drivers of economic disruption, such as the introduction of new technologies, and thus anticipate economic shifts, such as changes in the demand for cluster-related goods and services. This will help WD concentrate its funding on projects best aligned with the economy of tomorrow.
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