Western Canada's Economic Environment

Western Canada has a vibrant and growing economy.  Since 2003, British Columbia and Alberta are among the economic leaders in Canada.  The energy sector continues to anchor Alberta’s growth.  Strong world commodity prices boosted corporate earnings and led to record levels of investment in exploration, development and the construction of industrial facilities in 2006.  British Columbia’s economy is benefiting from the combined impact of high commodity prices, low interest rates driving demand for residential construction, and a series of major public infrastructure projects.

While still strong relative to national standards, economic growth rates in Saskatchewan and Manitoba have been more modest than those experienced in Alberta and British Columbia.  High oil and natural gas prices have contributed to economic growth in Saskatchewan, as have other natural resources such as uranium and potash.  Saskatchewan also has a growing ag-biotech sector to complement the province’s traditional strength in agricultural production.  In Manitoba, high levels of construction activity and a strong manufacturing sector are driving the economy and the province also benefits from a strong mining sector and alternative energy development.

Challenges and Opportunities

Natural Resource Dependency

Dependence on natural resources makes Western Canada vulnerable to risks such as volatility in the commodity markets, disruptions from trade disputes and disasters, and environmental issues.  Whereas the rest of Canada generates a greater proportion of GDP from the manufacturing sector, without diversification of its economy, Western Canada will be disproportionately affected when the current booming commodity markets flatten.   

Labour and Skills Shortages, Demographics, and an Economic Dichotomy

Across Western Canada, labour and skills shortages are cited as the most significant problem facing the economy.  While the populations of the two most western provinces are growing due to immigration and in-migration from other parts of Canada, neither province is able to meet the labour demands of their expanding economies.  The populations of Manitoba and Saskatchewan are also facing serious labour shortages, in large part due to the inter-provincial migration.

Western Canada’s rural and northern communities are facing serious economic challenges including the attraction and retention of highly skilled professionals and increased susceptibility to economic swings in natural resource industries.  The impacts of increased global competition from lower-cost production in emerging agricultural countries compounded with recent industry disasters have had significant negative impacts on the region’s agriculture industry.  In addition, rural areas are challenged by slumps in the region’s forestry industry, as it faces escalating labour, transportation, energy costs, and natural threats such as the pine beetle.  Along with the environmental consequences of northern economic growth, communities such as Fort McMurray face strained infrastructure and service provision.

Innovation and Technology Commercialization

At a time when Canada’s overall productivity gains are below those of other traditional nations with whom we compete, the need to encourage greater private-sector science and technology investment is a national priority.

Mobilizing Science and Technology to Canada’s Advantage (2007)

 

Innovation and technology commercialization are key factors in Western Canada’s economic development and diversification.  They offer the potential for improved productivity in the primary resource sector and improved competitive advantage in the production and trade of value-added goods and services related to natural resources.  Investments and policy approaches that promote innovation and technology growth and development will also help all four western provinces capitalize on the expansion of knowledge-based industries.  However, one of the most significant barriers to the expansion of knowledge-based industries is the commercialization stage.  Key issues include access to early stage capital to facilitate company start-up and growth, experienced management, lack of entrepreneurial culture, and access to resources to support knowledge-based companies taking their research from the development stage to commercially viable business.

Summary

Western Canada is currently experiencing strong economic growth.  However, in order to maximize and sustain the potential of the region’s economy, it is necessary to continue economic diversification efforts in order to alleviate the vulnerability associated with increased global competition and the region’s traditional reliance on natural resource sectors.  At the same time, tremendous economic opportunities exist within Western Canada: the region is already demonstrating strengths in emerging industries and the new economy; the small business sector is vibrant and offers significant potential for expansion; and, the region is geographically and strategically positioned to increase its international trade and attract investment.  By systematically responding to its challenges while making strategic investments to support development and diversification, the West will continue to play an economic leadership role within Canada.

As the federal regional development agency for Western Canada, WD is mandated to promote the development and diversification of the economy of Western Canada and to advance the interests of Western Canada in national economic policy, program and project development and implementation.  To this end, WD is actively pursuing a long-range set of policies and investments that are having a positive impact on the economic performance and competitiveness of Western Canada.  It will continue to do so working collaboratively and in partnership with others in the West.