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2024-25 Departmental Plan – Operational Context

As a result of sustained inflation and higher interest rates, Atlantic businesses and consumers face challenging economic conditions. In the fourth quarter of 2023, the Canadian Survey on Business Conditions showed that rising inflation and input costs (including labour, capital, energy and raw materials) and rising interest rates and debt cost were the most anticipated obstacles for Atlantic businesses in the coming months. (Source: Statistics Canada, Canadian Survey on Business Conditions.) As interest rates increased in response to inflation, economic activity slowed, and there remains the risk of a recession impacting the region’s economic performance.

Along with cost-related obstacles, labour shortages and recruiting skilled employees have been identified as key challenges among Atlantic Canadian businesses. Due to an aging population and negative natural increase, attracting people to the Atlantic region is essential to maintain Atlantic Canada’s economic momentum. Sustained by immigration and a net inflow of interprovincial migrants, the Maritime provinces’ population growth outpaced Canada (3.0%) year-over-year in July 2023. From July 1, 2022 to July 1, 2023, Prince Edward Island (3.9%), Nova Scotia (3.2%) and New Brunswick (3.1%) registered population growth at rates not seen since comparable data exists. Over the same period, Newfoundland and Labrador’s population (1.3%) grew the fastest in 50 years. (Sources: The Daily — Canada's demographic estimates for July 1, 2023: record-high population growth since 1957 (statcan.gc.ca); Statistics Canada. Table 17-10-0009-01 Population estimates, quarterly.) At the same time, the Atlantic labour market continues to be strong, as employment in the region grew by 34,900, or 3.0% in 2023, above the national rate of increase (2.4%). (Source: Table 14-10-0017-01 Labour force characteristics by sex and detailed age group, monthly, unadjusted for seasonality (x 1,000).

In addition to population growth, measures to increase the participation rate of under-represented groups in the labour force, including women, youth, Indigenous peoples and persons with disabilities, would support Atlantic firms in meeting their labour requirements and help sustain the region’s economic growth. These efforts, along with increases in automation, digitization and the integration of advanced technologies, will help regional businesses adapt to labour shortages and an aging demographic while increasing their productivity and competitiveness.

While economic growth in Atlantic Canada is expected to slow through 2024 as a result of the hike in interest rates, it is anticipated to do so less sharply than in other areas of the country due to the region’s sustained in-migration. In its most recent economic outlook, the Atlantic Economic Council forecasted that real gross domestic product (GDP) in the Maritime provinces would increase by 1.1% in 2024 and that Newfoundland and Labrador would register real GDP growth of 3.2% in 2024, both above the national rate of increase. Inflation is also expected to moderate in 2024 as the Bank of Canada’s monetary policy fully takes effect. (Source: Atlantic Economic Council: Atlantic economic growth is expected to weaken in 2024 - Atlantic Economic Council.)

Despite these positive economic trends, several factors, such as geopolitical concerns, extreme weather events resulting from climate change, air transportation access challenges, affordability issues and the supply of housing, pose a risk to business and community growth in the region. In the coming months and years, further economic growth in Atlantic Canada will continue to be sparked by a combination of factors such as:

• growth in established or emerging and value-added sectors, including oceans, food, mining, clean technology, and information and communication technologies;
• the ability of firms and communities to make the necessary investments and adjustments in support of a greener and more sustainable economy and to reduce greenhouse gas emissions;
• the development of innovative products and services;
• global economic developments, including greater access to international markets.

Atlantic Canadian companies have traditionally faced challenges in securing investments, in part due to the rural nature of the region, resistance from traditional funding lenders, and the risky nature of some projects. The Atlantic Canada Opportunities Agency’s role is to help these Atlantic Canadian businesses obtain funding and create local job opportunities. However, there are always risks associated with any business investment.