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2022-2023 Department Results Report – Operating Context
As recovery from the pandemic continued, Atlantic Canada’s real Gross Domestic Product (GDP) increased by 1.2% compared to 2021. At the national level, GDP grew by 3.6%. Growth in the Maritimes (2.3%) was below the national average. In Newfoundland and Labrador, GDP fell by 1.7% due to a significant drop in activity in the mining, quarrying and oil and gas extraction sectors.Footnote (1)
Exports from the region, and from the country as a whole, were boosted by strong demand for energy and food products resulting from the Russian invasion of Ukraine, which led to higher inflation. This positive momentum was mitigated by early supply chain difficulties and China’s zero-COVID-19 closure policy, which adversely affected the region’s iron ore and fishery exports in 2022. Compared to 2021, Atlantic Canada’s commodity exports rose by 16.6% to $43.2 billion in 2022. This rate was nevertheless lower than the national growth rate of around 25%.Footnote (2)
With respect to demographics, 2022 was an exceptional year for the Atlantic Region. Driven by international (+29,040 permanent residents) and interprovincial (+29,881 individuals) immigration, Atlantic Canada’s total population stood at over 2.5 million as of January 1, 2023, an increase of 78,113 individuals compared to January 1, 2022 (+3.1%).Footnote (3) This is the strongest demographic growth recorded in the region. Despite this significant population growth, rising mortgage rates resulting from increases in the Bank of Canada’s key rate to control inflation (from 0.25% at the start of 2022 to 4.25% at the end of 2022) dampened the gradual momentum of housing sales recorded in the region in 2020 and 2021. As a result, housing sales in the region declined by 18.5% compared to 2021Footnote (4), increasing pressure on rental housing affordability, with the vacancy rate below 2.0% in the Maritimes in October 2022.Footnote (5)
Atlantic Canada’s job market has recovered from the effects of the COVID-19 pandemic. In 2022, the region recorded 40,800 new jobs (+3.6%) over 2021. In comparison, employment in Canada rose by 4.0%. In 2022, the region had 17,400 more individuals in the job market (+1.4%).Footnote (6) This increase in the region’s labour force is still not enough to reassure companies about the availability of labour. In this regard, 44% of participants at the Atlantic Provinces Economic Council’s “Outlook” conference cited labour availability as their main concern for 2023, ahead of inflation (32%).Footnote (7) To address the issue of recruitment and retention, companies in the region were considering increasing wages, offering flexible schedules, and encouraging employees to participate in on-the-job training.Footnote (8)
As in Canada as a whole, inflation reached a record high in the Atlantic provinces in 2022,Footnote (9) ranging from 6.4% in Newfoundland and Labrador to 8.9% in Prince Edward Island. Rising energy prices, such as for oil and other fuels (+68.1 %) and gasoline (+34.0%) have hit Atlantic Canadians the hardest, as they use oil more often for home heating. In addition to consumers, companies in the region indicated in the fourth quarter of 2022 that inflation would be their main obstacle over the following three months, and they were more willing to pass on cost increases over the following twelve months to consumers (36% on average) than the national average (34%).Footnote (10) All these factors could undermine their competitiveness with companies in other regions of Canada and the world if innovative solutions are not found.
The adoption of leading-edge technologies as an innovative solution is essential to business productivity, competitiveness, and innovation. In this respect, companies in Atlantic Canada score lower than their counterparts (56.7% vs. 62.1% in Canada). When it comes to innovation, companies in the region are as innovative as the national average in terms of business processes (38%), but less innovative than the national average in terms of new or improved goods and services (25% in Canada vs. 21% in the region).Footnote (11)
In addition to commercial competitiveness, the adoption of technologies is a solution for achieving greenhouse gas emission reduction targets, including carbon neutrality by 2050. In 2022, Atlantic Canada had 169 non-diversified cleantech companies (which represents 7% of the country’s non-diversified cleantech companies), i.e., companies that develop or use innovative technologies with environmental benefits.Footnote (12) This percentage is encouraging, given that the region accounted for only 5% of Canadian companies in the same year. Furthermore, the use of clean technologies by companies in the region is broadly in line with the national average, which stands at 33% of companies.Footnote (13)
Over the past seven years (from 2015 to 2022), the region has seen positive momentum. In a Public Policy Forum report analyzing 20 indicators in five areas (macroeconomics, human capital, job market, investment, and quality of life), Atlantic Canada showed improvement with respect to 16 indicators, compared to 10 nationally.Footnote (14)