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Operating Context: 2023-24 Departmental Results Report

A tighter monetary policy, persistent inflation and several climate change-related events limited production growth in the region. Atlantic Canada’s real gross domestic product (GDP) rose by 0.4% compared to 2022. Nationally, GDP grew by 1.2%. Growth in the Maritime provinces (1.4%) was above the national average. In Newfoundland and Labrador, declines in the conventional oil and gas extraction (-13.3%) and metal ore extraction (-11.1%) industries contributed to a 2.5% drop in the province’s economic output in 2023.^{Footnote 1}

Compared to 2022, Atlantic Canada’s commodity exports fell by 12% to $38.1 billion in 2023. This fall in regional exports was greater than the decline recorded at the national level (-2.2%).^{Footnote 2} Most of the decline in exports can be explained by the fall in the price of petroleum products, which peaked in 2022 following Russian aggression in Ukraine, and inflation, which dampened international demand for seafood products.

As in Canada, inflation slowed in the Atlantic provinces in 2023. This downturn can be explained by lower energy prices, mainly for gasoline and fuel oil (used by nearly 30% of Atlantic households for heating). For example, with the exception of Nova Scotia (+4.0%), inflation rates in the Atlantic provinces were below the national rate of 3.9%: Newfoundland and Labrador, +3.3%; Prince Edward Island, +2.9%; and New Brunswick, +3.6%.^{Footnote 3} It is also worth noting that fewer companies in the region (53.8%) indicated in the fourth quarter of 2023 that inflation would be their main obstacle over the next three months, compared to the same period in 2022 (59.7%).^{Footnote 4}

The region saw very strong demographic growth in 2023. As of January 1, 2024, the total population of Atlantic Canada was over 2.6 million, an increase of 66,231 people compared to the figure recorded on January 1, 2023 (+2.6%). This demographic increase is a result of international immigration (+32,360 people) and interprovincial migration (+11,471 people).^{Footnote 5}

This extraordinary demographic growth in the region’s population, combined with high mortgage rates, drove up house prices and made home ownership difficult. According to the Canadian Real Estate Association, the Maritime provinces saw the highest price increases in 2023 compared to the pre-pandemic period (2019). While the average house price in Canada was 35.05% higher in 2023 than in 2019, the increase in the Atlantic provinces was 68.04% in New Brunswick;  65.21% in Nova Scotia; 61.49% in Prince Edward Island; and 21.68% in Newfoundland and Labrador.^{Footnote 6} The vacancy rate was 1.5% in New Brunswick and in Newfoundland and Labrador, and 1.1% in Nova Scotia and Prince Edward Island in October 2023.^{Footnote 7}

The job market in Atlantic Canada maintained its momentum after the pandemic. In 2023, the number of jobs in the region increased by 35,000 (+3.0%) over 2022. In comparison, employment in Canada increased by 2.4%. In 2023, there were 29,300 more people in the labour market (+2.3%)^{Footnote 8} in the region than the previous year. Only 28.8% of companies in the region mentioned the shortage of labour as a barrier in the fourth quarter of 2023, whereas this figure was 35% one year earlier,^{Footnote 9} which demonstrates a sign of strength in the labour market.

However, the increase in employment and hours worked was higher than the rise in business output, which led to a fall in productivity in all provinces. In the region, annual labour productivity (chained 2017 dollars) in 2023 fell by 4.2% compared with 2022, to $48.80 per hour. This decline was greater than that recorded at the national level (-2.2%), where annual labour productivity was $59.10 in 2023. Compared with the pre-pandemic year (2019), the labour productivity of companies in the region fell by 5.1%, while it rose by 0.2% in Canada.^{Footnote 10}

Given that improving labour productivity will require a sustained increase in capital spending, the region’s outlooks are encouraging. According to the recent report of the Atlantic Economic Council, investments in major projects in Atlantic Canada, stimulated by demographic growth and the transition to renewable energy sources, will increase by 11% to reach $16.5 billion in 2024 and by 19% to exceed $19 billion in 2025.^{Footnote 11} Nevertheless, high interest rates and labour shortages could delay these investments.

Innovation is another key factor in improving productivity and maintaining competitiveness on global markets. This is an area in which progress remains to be made nationally and regionally in the wake of the COVID-19 pandemic. According to a recent survey conducted by Statistics Canada,^{Footnote 12} the percentage of innovative companies in Atlantic Canada (58%) decreased over the pandemic period (2020 to 2022) compared to that recorded in 2017-2019 (68.5%). This decline is in line with the national trend, where the percentage of innovative companies was approximately 72% between 2020 and 2022 compared to nearly 80% in 2017-2019.