Manitoba’s steady, but largely unspectacular performance across virtually all sectors should generate real gross domestic product (GDP) growth of between 1.6% and 3% in 2013, economists say. That is in line with the predictions for the Canadian economy as a whole.
Manitoba’s performance is a product of its diversified economy, driven by sectors such as agriculture, aerospace, manufacturing and financial services. When one sector sags, another picks up the slack, so Manitoba avoids the booms and busts that Alberta (oil and gas) and Ontario (automobile manufacturing) historically have been prone to.
John McCallum, economics professor at the I.H. Asper School of Business at the University of Manitoba, predicts the province will churn out between 2% and 2.3% GDP growth in 2013. As a major exporter, Manitoba is continuing to feel the effects from a global economy that continues to sputter.
“We’re swimming up a stream,” McCallum says, “where the world is slower because of the euro and debt. About one-quarter of [Manitoba’s] economy is exports to the U.S.; and while the U.S. will perform better next year, it still won’t put up a very good number.
“We also have a very high dollar,” he continues, “which makes it tough on Manitoba manufacturers. We have 65,000 jobs in the export sector.”
It doesn’t help that Manitoba’s consumers, whose spending represents slightly more than half of the provincial economy, are up to their eyebrows in debt. Coupled with slow income growth, consumers will keep “chugging” along, McCallum says, but they won’t do anything particularly special for Manitoba’s economy.
Perhaps the biggest cloud on the province’s economic horizon is its ongoing dependence on federal transfers, McCallum says, which make up about 30% of the provincial government’s budget. However, he expects those transfers to start to decline.
“The provincial government obviously has a big financial problem with its deficit,” says McCallum. “I would be surprised – between the city and province, as they struggle with their budgets – if they don’t see raising taxes as a way to deal with it.”
The deficit is a red flag for the economics department at Toronto-Dominion Bank (TD), whose report cites the provincial deficit of $567 million for its forecast of 2.2% GDP growth this year, down from 2.3% last year.
@page_break@ Notes Sonya Gulati, senior economist at TD: “The Manitoba government has had difficulty keeping a lid on its overall shortfall. In the past few years, weather-related disasters were previously the culprits. In the case of today’s fiscal update, the program expenditure line is to blame.”
When the banks issued their 2013 forecasts in the middle of last year, Manitoba was widely expected to be among the top-performing provinces. As 2012 wore on, however, that enthusiasm waned. Royal Bank of Canada, for example, still the most bullish among the bank forecasters, now predicts that Manitoba’s GDP will come in at 3% in 2013, down from its earlier forecast of 3.3%.
Bank of Nova Scotia’s forecast is at the other extreme, predicting 1.6% GDP growth, a tick below the 1.7% it believes Canada will produce next year.
Bank of Montreal’s (BMO)economic forecast calls for a rebounding agricultural sector to help Manitoba churn out 2.3% GDP, outperforming BMO’s forecast for the country of 2%.
Canadian Imperial Bank of Commerce’s (CIBC) forecast agrees with BMO’s 2.3% figure. CIBC’s long-term forecast for the next decade predicts that Manitoba will have GDP growth of 2.5%, thanks in part to its ability to continue attracting highly employable immigrants from around the world: “Today’s skilled newcomers are increasingly choosing to put down roots in Alberta, Saskatchewan and Manitoba.”
Construction has been one of the best-performing sectors in Manitoba for the better part of a decade. A significant number of major projects in Winnipeg, such as the new terminal building at the James Armstrong Richardson International Airport, the Canadian Museum for Human Rights, the city’s long-awaited IKEA store and the new football stadium for the Winnipeg Blue Bombers are either completed or about to be.
Even though the construction industry has a high profile, it is a relatively small part of the provincial economy, McCallum says, so construction won’t propel the GDP to any unforeseen highs.
“How do we get a growth rate better than last year [in Manitoba] and better than Canada?” McCallum asks. “I look for the real big floodway-type announcement, which puts people to work. I just don’t see construction being all that much better next year.
“Housing, the major part of why we’ve grown so much in the past,” he continues, “isn’t running out of steam. But it’s running out of incremental steam. It’s hard to imagine it’s going to keep being better than it was in the past.”
Population: 1,267,003
GDP 2011 ($bil.): 53.4
GDP % change: +2.0
2012-13 deficit ($mil.): 567
Estimated net debT ($bil.): 16
Median after-tax income, all families: $47,000
household disposable income/capita: $26,201
Figures from latest available reports/estimates
Sources: Statistics Canada; Government reports
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