One-third of Chinese tourism dollar are likely to be lost
The Conference Board of Canada recently released the Provincial Outlook Economic Forecast Summary which provides the economic outlook for the provinces, including gross domestic product (GDP), output by industry and labour market conditions.
Estimates of the impact from COVID-19 on trade prices and tourism are included in the report. The latest available data show that over one million Chinese tourists visit Canada annually, spending $1.8 billion. The Conference Board of Canada estimates that we will lose one-third of Chinese tourism spending this year, resulting in a $550-million hit to real GDP in the first half of the year.
The largest dollar-value impact will be felt in British Columbia, while the largest proportional impact will occur in P.E.I. where tourism is an important contributor to the local economy. Trade prices for seafood products will also be impacted affecting the value of nominal exports in Atlantic Canada.
The Canadian economy is expected to expand by 1.8 per cent this year and 1.9 per cent in 2021 as energy investment recovers and solid disposable income growth supports household spending.
The coronavirus is expected to lower tourism spending by around $550 million in the first half of this year.
Steady economic growth at the national level is masking regional economic growth disparities this year. British Columbia and P.E.I. are set to post growth above 3 per cent in 2020, while Saskatchewan’s economy is expected to grow by just half a percentage point.
Provincial growth prospects are expected to converge next year, with only a couple of provinces forecast to grow at a rate significantly different from that for the Canadian economy as a whole.
Key findings, by province:
Newfoundland and Labrador‘s economy is set to expand at a steady pace over the medium term after several years of uneven growth. Overall, we expect the GDP to average annual growth of 1.0 per cent over this year and next.
Prince Edward Island is set to lead the pack again. The recent economic hot streak for Prince Edward Island is showing few signs of slowing. Strong population growth thanks to an influx of international immigrants, combined with one of the lowest vacancy rates in the country, is leading to surging housing demand on the Island.
Nova Scotia‘s economic growth will ease to 1.2 per cent in 2020, due mainly to the closure of the Northern Pulp Mill and declines in residential investment. Population growth is set to slow, dampening demand for new housing and leading to a decline in residential investment throughout the forecast.
New Brunswick‘s economy performed well in 2019, growing by 1.4 per cent. And we forecast an even better year in 2020, with growth nudging up to 1.5 per cent. The province has suffered through a string of bad news in recent years, including the explosion at the Irving refinery in 2018, the closures of the Belledune smelter and the Baker Brook sawmill at the end of 2019, and fires at two different lobster processing plants. But New Brunswickers can look forward to better economic prospects going forward.
Quebec‘s economy has enjoyed a strong run over the past few years, with the province reaping the benefits of high levels of consumer confidence, healthy population growth, and strong levels of business investment. These factors have helped economic growth surpass 2.0 per cent every year since 2017, with annual gains averaging 2.6 per cent.
Ontario‘s real GDP is forecast to rise 1.8 per cent in both 2020 and 2021. That is roughly in line with the province’s growth in 2019, but well below the 2.4 per cent average between 2014 and 2018. Several factors are contributing to our outlook for slower growth ahead. Moderating wage and employment gains will weigh on household disposable income and limit the potential upside of household consumption. In addition, more stringent government spending means that the public sector’s contribution to the province’s economy will be more subdued than in recent years.
Manitoba‘s economy is forecast to grow by 1.0 per cent in 2020–roughly in line with last year’s 0.9 per cent pace. The completion of major projects in the province will weigh on business spending this year and next. Fortunately, residential investment in set to pick up over the near term, as population growth remains strong and housing starts have fallen well below household formation in recent years. We expect economic growth to pick up in 2021 to 2.0 per cent.
Saskatchewan‘s economy ended 2019 on a sour note. Employment declined in the fourth quarter, retail sales fell over the second half of last year, and the province’s potash sector was hit by one closure after another.
Alberta is set to an uneven recovery. The province’s economy will get back on track in 2020 after a mild recession this past year. Difficult operating conditions in the energy sector led many oil and gas companies to slash their 2019 spending plans, deleverage debt, and focus on shoring up their financial positions.
British Columbia‘s economy will continue to post strong growth in 2020. Real GDP in the province is expected to expand 3.1 per cent this year, which will keep B.C. among the top three provinces in terms of economic growth for the seventh year in a row.