Once considered the engine of the Canadian economy, Ontario’s economic performance over the last two decades has been among the weakest in the country, according to a new study by the Fraser Institute.
“The decline of Ontario’s manufacturing sector in the 2000s, the 2008/09 recession and a tepid recovery have combined to create an extended period of economic weakness for the province,” said Ben Eisen, co-author of An assessment of Recent Economic Performance and Business Investment Growth in Ontario.
“Ontario’s position near the bottom of the Canadian provinces doesn’t bode well for the province’s future prospects.”
Covering the period from 2000 to 2019 (excluding 2020 due to the COVID-19 pandemic), the report found Ontario performed well below its own historic economic norms, most other provinces, and neighbouring U.S. states.
In the key metric of per-person business investment which, Eisen said, “lies at the heart of improving our standard of living and job creation,” Ontario recorded the third-lowest average annual growth rate of just 0.3% when adjusted for inflation and population.
Only New Brunswick and Nova Scotia had lower growth rates and Ontario lagged far behind B.C., the top-performing province, where the average growth rate was 2.7%.
Ontario was the worst performer in real per-capita aggregate economic growth of 9.1% from 2000-19, compared to an average of 26.1% for all provinces, excluding Ontario.
The Ontario economy also underperformed compared to previous decades.
From 1982-90, Ontario’s average annual real per capita GDP growth rate was 1.5% and 1.4% from 1991-2000, before plummeting to 0.1% from 2001-10 and only partly recovering to 0.9% from 2011-19.
Private-sector job growth in Ontario only increased by 23.2% from 2000-19, compared to an average of 31.7% for all other provinces, ahead of only New Brunswick (10.0%) and Nova Scotia (14.2%) and on par with Newfoundland & Labrador (23.1%) and Manitoba (23.1%).
Ontario’s nominal net debt per capita from 2000-19, increased more than in any other province — by $12,952 — and its debt-to-GDP ratio — the lower the better — went from sixth-highest among the provinces in 2000 to second highest in 2019.
“In more recent years (prior to the COVID pandemic), weak economic performance in several jurisdictions, particularly Canada’s oil-producing regions, have led to a slight improvement in Ontario’s relative performance within Canada on economic growth,” the study concludes.
“However, Ontario should take no comfort in this development. The reversal is the result of weakness in other jurisdictions, not improvement in Ontario per se … Ontario has stopped being the economic growth laggard in Canada, but that is primarily because of more economic weakness elsewhere in the country … not because of improvements in Ontario.”
The Fraser study doesn’t go into the reasons for Ontario’s economic decline from 2000-19 and, to be clear, provincial economies are impacted by both national and global events in addition to policies by provincial governments.
That said, for the vast majority of the time covered by this study, the big-spending, high-deficit Liberal governments of Dalton McGuinty and Kathleen Wynne were in charge of the province — from 2003-18.
Their policies turned Ontario into one of the world’s most indebted sub-sovereign borrowers and, among other things, dramatically increased electricity prices, causing significant job losses in Ontario’s manufacturing sector.
More proof, if any was needed, that government policies have a direct impact on economic growth, jobs, and our standard of living.
Canada to wind down broad-based COVID aid programs as economy recovers – Reuters Canada
OTTAWA, Oct 21 (Reuters) – Canada will not extend existing broad-based COVID-19 support programs for companies and individuals when they expire on Saturday because the economy is recovering well, Finance Minister Chrystia Freeland said on Thursday.
Instead, Ottawa will introduce more targeted and less costly measures for hard-hit sectors such as the tourism industry.
The new programs will cost a total of C$7.4 billion ($6 billion) between Oct. 24 and May 7, 2022, compared with the C$289 billion Canada has already spent, Freeland said.
“Our economy is rebounding, and we are winning the fight against COVID,” she told reporters.
Ottawa will aid hotels, restaurants and travel agencies still facing public health restrictions. It will also help cover the rent costs of employers who can show they have faced deep, enduring losses.
A third program is for companies that might suffer in case there are more lockdowns.
Prime Minister Justin Trudeau’s minority Liberal government spent heavily to tackle the pandemic, sending the national debt and budget deficits to record highs.
“Today our support needs to be more narrow, more targeted and less expensive,” said Freeland.
The left-leaning opposition New Democrats, whose support the Liberals will need to govern, said Trudeau was acting hastily.
“The COVID-19 pandemic is not over. … This is clearly not the time to cut help for families and small businesses,” leader Jagmeet Singh said in a statement.
Separately, officials said Ottawa and the 10 provinces had agreed on a standard COVID-19 electronic vaccination passport allowing domestic and foreign travel.
The deal prevents possible confusion that could be caused if the provinces – which have primary responsibility for healthcare – all issued their own certificates.
The National Airlines Council of Canada, which represents major carriers, welcomed the move but said Ottawa should take other measures to boost travel such as scrapping pre-departure testing for fully vaccinated people coming to Canada.
($1 = 1.2375 Canadian dollars)
Reporting by David Ljunggren; Additional reporting by Julie Gordon; Editing by Alistair Bell and Peter Cooney
Our Standards: The Thomson Reuters Trust Principles.
World Bank sees ‘significant’ inflation risk from high energy prices
Energy Prices are expected to inch up in 2022 after surging more than 80% in 2021, fueling significant near-term risks to global inflation in many developing countries, the World Bank said in its latest Commodity Markets Outlook on Thursday.
The multilateral development bank said energy prices should start to decline in the second half of 2022 as supply constraints ease, with non-energy prices such as agriculture and metals also expected to ease after strong gains in 2021.
“The surge in energy prices poses significant near-term risks to global inflation and, if sustained, could also weigh on growth in energy-importing countries,” said Ayhan Kose, chief economist and director of the World Bank’s Prospects Group, which produces the Outlook report.
“The sharp rebound in commodity prices is turning out to be more pronounced than previously projected. Recent volatility in prices may complicate policy choices as countries recover from last year’s global recession.”
The International Monetary Fund, in a separate blog https://blogs.imf.org/2021/10/21/surging-energy-prices-may-not-ease-until-next-year, said it expected energy prices to revert to “more normal levels” early next year when heating demand ebbs and supplies adjust. But it warned that uncertainty remained high and small demand shocks could trigger fresh price spikes.
The World Bank noted that some commodity prices rose to or exceeded levels in 2021 not seen since a spike a decade earlier.
Natural gas and coal prices, for instance, reached record highs amid supply constraints and rebounding demand for electricity, although they are expected to decline in 2022 as demand eases and supply improves, the bank said.
It warned that further price spikes could occur in the near-term given current low inventories and persistent supply bottlenecks. Other risk factors included extreme weather events, the uneven COVID-19 recovery and the threat of more outbreaks, along with supply-chain disruptions and environmental policies.
Higher food prices were also driving up food-price inflation and raising questions about food security in several developing countries, it said.
The bank projected crude oil prices would reach $74/bbl in 2022, buoyed by strengthening demand from a projected $70/bbl in 2021, before easing to $65/bbl in 2023.
The use of crude oil as a substitute for natural gas presented a major upside risk to the demand outlook, although higher energy prices may start to weigh on global growth.
The bank forecast a 5% drop in metals prices in 2022 after a 48% increase in 2021. It said agricultural prices were expected to decline modestly next year after jumping 22% this year.
It warned that changing weather patterns due to climate change also posed a growing risk to energy markets, potentially affecting both demand and supply.
It said countries could benefit by accelerating installation of renewable energy sources and by cutting their dependency on fossil fuels.
(Reporting by Andrea Shalal; editing by Diane Craft)
Global Climate Policy Acceleration Means Sink-or-Swim Decade for Canada's Economy: Report – Canada NewsWire
OTTAWA, ON, Oct. 21, 2021 /CNW Telbec/ – Canada’s economy faces a “sink-or-swim” decade, according to the first study to assess Canada’s economic prospects in the face of accelerating global market shifts responding to climate change.
Sink or Swim: Transforming Canada’s economy for a global low-carbon future is a major new report from the Canadian Institute for Climate Choices, Canada’s independent climate policy research institute. The report assesses Canada’s economic prospects in response to the global low-carbon transition and offers recommendations for successfully navigating that transition.
Countries responsible for over 70 per cent of global GDP and over 70 per cent of global oil demand have committed to reaching net zero emissions by mid-century. Trillions of dollars in global investment will move away from high-carbon sectors. The impact of these global shifts will be profound, shifting trade patterns, reshaping demand, and upending businesses that are too slow to adapt.
To better understand the risks and opportunities of this transition for Canada, Sink or Swim stress tests publicly traded companies under different scenarios. Without major investment, the report finds, many exporters and multinationals will see significant profit loss in the coming decades. The stakes are high for Canada, with almost 70 per cent of goods exports and over 800,000 jobs in transition-vulnerable sectors, including oil and gas, mining, heavy industry, and auto manufacturing.
To succeed in this global transition, the report concludes, Canada must use climate policy, company disclosure, and targeted public investment to mobilize private finance and improve the resilience of Canada’s workforce and impacted communities.
“Our analysis shows that global policy and market changes will have a profound impact on Canada’s economy and workforce. To stay competitive, Canada needs to rapidly scale up new, transition-consistent sources of growth—and successfully transform existing ones. Moving too slowly is now a greater competitive risk than moving too quickly.”
—Rachel Samson, Clean Growth Research Director, Climate Choices
“The global transition means Canada must transform its economy in the face of new market realities. With smart, certain policy and innovation across the private sector, there is a path to strong economic growth, gains in well-being, and lower emissions.”
—Don Drummond, Stauffer-Dunning Fellow and Adjunct Professor at the School of Policy Studies at Queen’s University and fellow-in-residence at the C.D. Howe Institute
“Major Canadian investors understand the pressures our economy will be facing as a result of accelerating global market shifts, and we’re issuing a strong call for increased climate accountability and transparency in the corporate sector.”
—Dustyn Lanz, CEO, Responsible Investment Association
“The Aluminum Association of Canada supports a holistic view of Canada’s trajectory towards net zero emissions. A multifaceted approach with room for everyone will support a transition to a prosperous and sustainable economy.”
—Jean Simard, President and Chief Executive Officer of the Aluminium Association of Canada
“Canadian businesses and investors need clarity on which economic activities are consistent with the transition to a low-carbon future. Without that clarity, there is a risk that finance will flow in the wrong directions and miss areas of great opportunity. The analysis in this report will support the development of practical taxonomies that can be used for transition-consistent investment decisions and financial products.”
—Barbara Zvan, CEO & President, University Pension Plan and member of Canada’s former Expert Panel on Sustainable Finance. UPP is a participating organization of the Sustainable Finance Action Council
ABOUT CLIMATE CHOICES
The Canadian Institute for Climate Choices is Canada’s independent climate policy research institute, providing evidence-based policy analysis and advice to decision makers across the country.
SOURCE Canadian Institute for Climate Choices
For further information: Catharine Tunnacliffe, Director of Communications, (226) 212-9883
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