The Covid-19 pandemic and the emergence of the second wave have significantly impacted the Canadian economy. Last December, the OECD published its latest economic update that showed Canada’s economy contracting by 5.4% in 2020 — worse than the United States, which saw a 3.7% reduction in economic growth. The OECD forecasts that Canada’s economy will grow by 3.5% in 2021 and perform better than the United States, which is expected to see a 3.2% growth next year. However, despite the positive recovery signals, the fallout from the Covid-19 crisis has negatively impacted Canada’s fiscal balance and employment figures. In December, Canada’s Fall Economic Statement 2020 reported that the federal government’s deficit is expected to reach C$381.6 billion in 2020-21 — the largest deficit in dollar terms on record — with the federal debt-to-GDP ratio rising from 31.2% in 2019-20 to 50.7% in 2020-21.
Meanwhile, Statistics Canada’s latest monthly update shows the unemployment rate steadily declining to 8.5% in November 2020, down from a peak of 13.7% in May 2020 — but comparatively, Canada’s current unemployment rate still lags behind the OECD and G7 averages that stand at 7.1% and 6.1%, respectively. As part of the economic recovery, Canada has introduced programmes to support individuals, families and businesses facing hardship due to the Covid-19 downturn. The economic recovery measures have helped shore up short-term stability. However, given the continued uncertainty and structural economic changes caused by Covid-19, leading experts are recommending that the government continue to support small businesses to adopt new technologies, help upskill the workforce, and promote a green recovery by enabling cleantech companies to scale up.
Support SME digitisation to advance economic recovery measures
Canada’s small and medium-sized enterprises (SMEs) have had to endure a difficult past year. According to the Canadian Federation of Independent Business index — which measures confidence among small firms — the sentiment among Canada’s SMEs dropped to its lowest in five months after a resurgence of Covid-19 cases prompted another round of closures and containment measures in October 2020. As SMEs account for 60% of total employment and contribute more than 50% to Canada’s GDP, regenerating confidence and enabling SMEs to scale up will be critical in driving future growth. Based on a new report from the Public Policy Forum, Canadian SMEs incorporating digital technologies would adapt better to the “new normal” and be in a position to scale their business in the coming years. In an interview, Nick Van Weerdenburg, Founder and CEO at Rangle.io, stated that “using digital technologies has become necessary for SMEs to succeed in today’s economy”. He mentioned that from now on, “SMEs leveraging digital solutions would benefit from productivity gains that would allow them to improve their products and services to grow in the future”.
For SMEs to take advantage of digitalisation, Mr Van Weerdenburg suggested that “policy measures that help SMEs integrate technology into their business will be important steps”. He recommends that the government make “grants, tax credits and interest-free loans available for SMEs” to adopt digital technologies into their business. Through these measures, he pointed out that SMEs would reduce their upfront costs and invest in long-term solutions that would drive business growth. For Canada’s economy, the steps to support SMEs digitalisation could also have broader benefits because it could enable more SMEs to integrate with global markets and global value chains (GVCs). The OECD’s SME and Entrepreneurship Outlook 2019 highlighted that digitalisation helps SMEs reduce size disadvantages in international trade and capitalise on growth opportunities abroad. Because trade plays a vital role in Canada’s economy — representing 66% of GDP and with one in every five Canadian jobs being directly linked to exports — the adoption of digital technology among SMEs could enable more firms to export their products and promote long-term economic growth in Canada.
Provide equal access to skills training for inclusive growth
According to the OECD’s latest report on Canada’s economy, the adoption of digital solutions across sectors in response to economic challenges will likely continue to accelerate post-Covid-19. Although the shift to integrate new technologies offers firms the opportunity to boost productivity, it also creates segments in the workforce that become vulnerable to the changes. This results in jobs changing over time, requiring the workforce to access upskilling opportunities to remain employable. Simultaneously, firms need the talent to grow, and having a productive workforce is vital to their success. In the Business Development Bank of Canada’s latest survey, 67% of the firms surveyed indicated challenges to recruiting now that was not necessarily an issue before the pandemic, with specialised workers being the most challenging hiring category. Given the pace of technological change, Canada will need to help firms leverage technology and help workers access skills training to generate productivity growth. To prepare the workforce for the changes in the economy, Pedro Barata, Executive Director at Future Skills Centre, stated in an interview that “strong collaboration among governments, academic institutions and businesses will be necessary to develop and deliver programmes that allow workers to acquire the skills needed in their region and industry”.
As technology is playing an increasingly important role in today’s economy, Mr Barata pointed out that “the focus of skills training has to shift so that learning and upskilling become a permanent feature of any job”. Given the diverse nature of Canada’s economy, with multiple sectors playing a critical role in certain parts of the country, providing equal access to ongoing skills training will be vital in promoting inclusive growth. One way to deliver skills training programmes at-scale is through online education. In Canada, high-speed broadband coverage lags behind in rural regions where it is often needed the most, especially among youth, Indigenous and senior populations. JP Gladu, former President and CEO of the Canadian Council for Aboriginal Business, said in an interview that “high-speed internet infrastructure is an essential component to ensure reskilling and upskilling opportunities reach rural and Indigenous communities”. Through improvements in broadband infrastructure and access to skills training in the region, Mr Gladu underscored that these initiatives would “promote economic development and enable more people, especially the Indigenous communities, to build innovative businesses and contribute to the Canadian economy”. This could go a long way towards meeting the goal of equal access to skills training for inclusive growth.
Improve demand for cleantech products through structural changes
Mark Carney, former Governor of the Bank of Canada and England, recently said that the transition to net-zero “is creating the greatest commercial opportunity of our age”. As a signatory of the Paris Climate Agreement, Canada has taken steps to achieve net-zero emissions by supporting clean energy technologies through various programmes that promote green growth and seize growth opportunities both at home and abroad. In Canada’s economic strategy, the federal government set a target for the cleantech sector to reach C$20 billion in annual exports and become one of Canada’s top five exporting industries by 2025. For Canada to achieve these goals, cleantech companies will need to overcome the challenges and barriers of scaling up to capture a sizeable portion of the US$2.5 trillion in the global cleantech market. Nicholas Parker, former Chairman and Co-Founder of the Cleantech Group, who coined the term “cleantech” in 2002, said in an interview that “Canada’s cleantech sector has made great progress in recent years, but to scale up, the government needs to incentivise an increased demand for cleantech products among consumers”. To achieve this, Mr Parker suggested that reforming critical areas that “strengthen building codes and fuel standards, incentivise large pension funds to divest from fossil fuels and level the playing field by phasing out fossil fuel subsidies” will be essential steps from now on.
By adopting these reforms, Mr Parker projects that the “demand for clean energy products will increase and help cleantech companies to scale up”. For Canadian cleantech companies to compete in global markets, Mr Parker recommends that companies look to “build niche cleantech products” that leverage Canada’s existing expertise in “artificial intelligence, manufacturing and high-tech engineering”. He referred to the upgrading of Ford’s assembly plant in Oakville as an excellent example, noting that Canada’s established history in automaking enables it to be well-positioned to lead in electric vehicle production. But in Mr Parker’s opinion, the most critical component for cleantech companies to scale up lies in “integrating their high-tech solutions with existing industries to facilitate broader decarbonisation efforts”. He highlighted that Canada needs to improve corporate reporting on climate change to help cleantech companies integrate their solutions with businesses and industries. Through greater visibility into climate-related data and information, Mr Parker said that “cleantech companies would be able to develop tailored products for businesses, especially in heavy industry sectors, to decarbonise large parts of the economy and promote a green recovery”.
Special thanks to Sara MacIntyre, CEO at VUCA-SERA and Peter McArthur, Chair of the Ontario Clean Technology Industry Association for their time in providing me with an overview of Canada’s economy.
VICTORIA – British Columbia is forecasting a record budget deficit and a rising debt of almost $129 billion less than two weeks before the start of a provincial election campaign where economic stability and future progress are expected to be major issues.
Finance Minister Katrine Conroy, who has announced her retirement and will not seek re-election in the Oct. 19 vote, said Tuesday her final budget update as minister predicts a deficit of $8.9 billion, up $1.1 billion from a forecast she made earlier this year.
Conroy said she acknowledges “challenges” facing B.C., including three consecutive deficit budgets, but expected improved economic growth where the province will start to “turn a corner.”
The $8.9 billion deficit forecast for 2024-2025 is followed by annual deficit projections of $6.7 billion and $6.1 billion in 2026-2027, Conroy said at a news conference outlining the government’s first quarterly financial update.
Conroy said lower corporate income tax and natural resource revenues and the increased cost of fighting wildfires have had some of the largest impacts on the budget.
“I want to acknowledge the economic uncertainties,” she said. “While global inflation is showing signs of easing and we’ve seen cuts to the Bank of Canada interest rates, we know that the challenges are not over.”
Conroy said wildfire response costs are expected to total $886 million this year, more than $650 million higher than originally forecast.
Corporate income tax revenue is forecast to be $638 million lower as a result of federal government updates and natural resource revenues are down $299 million due to lower prices for natural gas, lumber and electricity, she said.
Debt-servicing costs are also forecast to be $344 million higher due to the larger debt balance, the current interest rate and accelerated borrowing to ensure services and capital projects are maintained through the province’s election period, said Conroy.
B.C.’s economic growth is expected to strengthen over the next three years, but the timing of a return to a balanced budget will fall to another minister, said Conroy, who was addressing what likely would be her last news conference as Minister of Finance.
The election is expected to be called on Sept. 21, with the vote set for Oct. 19.
“While we are a strong province, people are facing challenges,” she said. “We have never shied away from taking those challenges head on, because we want to keep British Columbians secure and help them build good lives now and for the long term. With the investments we’re making and the actions we’re taking to support people and build a stronger economy, we’ve started to turn a corner.”
Premier David Eby said before the fiscal forecast was released Tuesday that the New Democrat government remains committed to providing services and supports for people in British Columbia and cuts are not on his agenda.
Eby said people have been hurt by high interest costs and the province is facing budget pressures connected to low resource prices, high wildfire costs and struggling global economies.
The premier said that now is not the time to reduce supports and services for people.
Last month’s year-end report for the 2023-2024 budget saw the province post a budget deficit of $5.035 billion, down from the previous forecast of $5.9 billion.
Eby said he expects government financial priorities to become a major issue during the upcoming election, with the NDP pledging to continue to fund services and the B.C. Conservatives looking to make cuts.
This report by The Canadian Press was first published Sept. 10, 2024.
Note to readers: This is a corrected story. A previous version said the debt would be going up to more than $129 billion. In fact, it will be almost $129 billion.
NANAIMO, B.C. – Former Bank of Canada governor Mark Carney says he’ll be advising the Liberal party to flip some the challenges posed by an increasingly divided and dangerous world into an economic opportunity for Canada.
But he won’t say what his specific advice will be on economic issues that are politically divisive in Canada, like the carbon tax.
He presented his vision for the Liberals’ economic policy at the party’s caucus retreat in Nanaimo, B.C. today, after he agreed to help the party prepare for the next election as chair of a Liberal task force on economic growth.
Carney has been touted as a possible leadership contender to replace Justin Trudeau, who has said he has tried to coax Carney into politics for years.
Carney says if the prime minister asks him to do something he will do it to the best of his ability, but won’t elaborate on whether the new adviser role could lead to him adding his name to a ballot in the next election.
Finance Minister Chrystia Freeland says she has been taking advice from Carney for years, and that his new position won’t infringe on her role.
This report by The Canadian Press was first published Sept. 10, 2024.
HALIFAX – The Nova Scotia government has introduced a bill that would kick-start the province’s offshore wind industry without federal approval.
Natural Resources Minister Tory Rushton says amendments within a new omnibus bill introduced today will help ensure Nova Scotia meets its goal of launching a first call for offshore wind bids next year.
The province wants to offer project licences by 2030 to develop a total of five gigawatts of power from offshore wind.
Rushton says normally the province would wait for the federal government to adopt legislation establishing a wind industry off Canada’s East Coast, but that process has been “progressing slowly.”
Federal legislation that would enable the development of offshore wind farms in Nova Scotia and Newfoundland and Labrador has passed through the first and second reading in the Senate, and is currently under consideration in committee.
Rushton says the Nova Scotia bill mirrors the federal legislation and would prevent the province’s offshore wind industry from being held up in Ottawa.
This report by The Canadian Press was first published Sept. 10, 2024.
