The Canadian economy is slowing down but some provinces are doing better than others. Statistics Canada (Stat Can) released annual provincial real gross domestic product (GDP) for 2023 this morning. The data shows 9 in 10 provinces grew, with those in the West showing the highest growth. When adjusted for the population, only half of the provinces are seeing a decline in growth—a trend that may reverse as rates fall and population is throttled.
Western Canada Has The Fastest GDP Growth In The Country
Canadian GDP is generally slowing, reflected in virtually all provinces. National GDP advanced 1.5% in 2023, falling from 4.2% in 2022 but still better than no growth. The provincial breakdown shows that 9 of the provinces showed growth, with only Newfoundland (-2.6%) pulling back. Territories are much smaller economies, but 2 out of 3 managed to show aggregate growth.
Leading the country’s growth was exclusively provinces in Western Canada. The highest growth was observed in BC (+2.4%), followed by Saskatchewan (+2.3%), and Alberta (+2.3%). Ontario (+1.4%) was a middle of the road performer, but Canada’s largest province is close to the national average.
Source: BMO Capital Markets.
However, this is aggregate GDP. As we’ve come to learn in recent months, adjusting for the country’s population boom can lead to a very different picture.
Half of Canadian Provinces Failed To Show Per Capita Growth
Growing GDP is generally good news but it can be misleading. Occasionally, the population will outpace GDP and print higher growth while households contribute less. Rather than households seeing growth, they’re declining and the state is making up the decline by just adding more households. It’s a strategy that works briefly before producing liabilities and quality of life erosion.
Canada is currently in that phase, and so are half of the provinces in the country. “One takeaway for the group is that, while each provincial GDP pie is getting bigger, the slices (i.e., per-capita output) in many cases are getting smaller,” explains BMO senior economist Robert Kavcic.
Source: BMO Capital Markets.
Adding, “Per-capita output has contracted across 5 of 10 provinces over the past five years, a stark change from the prior two periods. Note that each period involved a major shock, be it the financial crisis (2008-13) or the oil boom/bust (2013-18).”
The bank sees Canada’s monetary easing cycle boosting economic activity in the coming months. Provinces with the weakest housing markets and a drag on consumption (BC & ON), are expected to get the biggest boost. Though tapering population growth will have an impact on aggregate GDP in the near-term, primarily in the provinces with the biggest inflows of temporary residents. That is once again BC and ON, potentially indicating the upward pressure may be offset by the downward pressure.
Those excited by the potential of an improved economy may want to wait before celebrating. Kavcic bluntly warns, “Upwardly-revised growth rates have made the per-capita performance look less bad, but it still looks generally bad.”
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