It won’t come as a surprise that lower oil prices have had a negative impact on the export economies of Western Canada, particularly Alberta, where energy makes up more than three-quarters of the value of everything it sells to the world. But there’s some good news to report: EDC’s latest Global Export Forecast Fall 2015 predicts that the worst is now behind us, with the export picture for Alberta, Saskatchewan and Manitoba set to improve in 2016 – in part because of a modest recovery in energy prices but also because the U.S. economy remains on track for continued strong growth.
All three western provinces have seen significant declines in their energy exports this year: down 43 per cent in Saskatchewan, 30 per cent in Alberta and 24 per cent in Manitoba. But because Saskatchewan and Manitoba have a more diverse export economy than Alberta, their overall exports haven’t been hit as hard. In fact, for Manitoba, where non-energy sectors account for almost 90 per cent of export revenues, overall exports actually grew modestly this year, while Saskatchewan saw overall exports slip by just six per cent, thanks to strong growth in fertilizer and agri-food exports.
It’s a story being played out in other provinces and regions, where greater diversification of exports – and export markets – helps to moderate the effects of setbacks in any single sector or country. Manitoba is the most diversified of the three western provinces, followed closely by Saskatchewan, both of which sell about a third of their exports to non-U.S. markets, compared to Alberta’s 90-per-cent reliance on sales to the United States. They also have a wider range of exports than Alberta, with no sector accounting for more than about 40 per cent of sales.
There is, of course, a flip side to this story: the same diversification that has helped Saskatchewan and Manitoba smooth out the effects of lower energy prices on their exports in 2015 means they’re not going to see as big a jump in exports next year as Alberta will see oil prices pick up a bit. EDC is forecasting Alberta’s overall exports will be up 15 per cent in 2016, thanks to a 20-per-cent rise in the value of its energy exports, while a 15-per-cent rise in Manitoba’s energy exports will boost its overall exports by a more modest (but still strong) six per cent. For Saskatchewan, a 13-per-cent rise in energy exports will contribute to a five-per-cent increase in overall exports.
There’s more good news in the EDC Global Export Forecast 2015: prospects for export growth in Western Canada are mirrored across the country, which in turn will contribute to a 2.3-per-cent rise in Canada’s gross domestic product in 2016. To find out what else is in store for the Canadian economy and exports, check out the full report here.