One economist says provinces in Western Canada are likely to benefit from structural economic advantages, raising forecasts for the region’s gross domestic product (GDP).
Scotiabank Economist Laura Gu said in a report Tuesday that British Columbia and the Prairie provinces have benefited from rising labour supply amid difficulties around capital investment and declining productivity due to demographic changes.
The report highlighted that as a retirement wave plays out, participation rates are expected to fall, leaving Western provinces with higher relative levels of participation due to younger populations.
“Western provinces, led by British Columbia (B.C.) and Alberta have demonstrated historically impressive growth, propelled by strong structural advantages. Potential GDP forecasts suggest sustained outperformance in the west relative to the national average in the next two years,” Gu said.
The report said the “rapid growth of labour supply” provides the Prairie provinces with an advantage over the rest of Canada.
“The rapid replenishment of labour supply comes not only from population growth—demographic factors, particularly population aging and migration, are playing an important role in shaping the labour market,” the report said.
Over the past two decades, Gu said provinces in Western Canada have experienced “strong growth” coupled with gains in labour productivity. The report said this is due to “substantial investment,” specifically in the oil and gas sector during the early 2010s. However, the report notes that a “broad-based decline” in labour productivity since 2019 has mitigated growth in this area.
Meanwhile, Gu noted that B.C. has raised its economic potential through enhanced labour productivity “driven by increased capital investments in natural gas, utilities and manufacturing sectors, enhancing production capacities.”
Gu said she expects B.C. to rank the highest for potential growth over the forecast horizon, followed by Alberta.
“Saskatchewan holds an advantage over the national average, although to a lesser extent. Manitoba’s growth profile should remain middle-of-the-pack, closely following that of the national average,” the report said.
