Declines in oil investment, housing, consumer spending to halve Canadian GDP growth: Report
CALGARY — A triple threat of falling consumer spending, a potential pull back in residential housing investment an dane mic levels of oil and gas expenditures could cut Canada’s economic growth rate in half for the next 15 years, a new Boston Consulting Group report warns.
“We’ve gotten used to sustained growth that is the envy of a lot of other G7 and advanced countries,” Keith Halliday, director of BCG Centre for Canada’s Future, told the Financial Post. “Past performance is no guarantee of future performance and if these downside scenarios materialize, it will mean lower incomes, fewer business opportunities and less government tax revenue for social programs than we would expect.”
In a report released Tuesday, the consultancy said it expects Canada’s GDP growth rate to fall from a historical average of 2.4 per cent between 1995 and 2016 – a level of growth that outpaced all other G7 countries – to an average of just 1.2 per cent between now and 2030.
The decline in GDP growth will be led by a 0.9 per cent fall in consumer spending, another 0.3 percentage point decline in residential housing investment and a 0.1 per cent decline in oil and gas related capital expenditures, the report said.
“If you express these ideas as fractions of a percentage point, it doesn’t seem like very much, but compounded over 20 or 30 years, the impact is quite significant,” the Toronto-based Halliday said.
The report states that oil and gas makes up 18 per cent of the country’s GDP, 12 per cent of its jobs and 27 per cent of its exports, and “no matter how you slice it, the energy and mining sector makes up a significant portion of economic activity in Canada.”
BCG said that after capital expenditure “plummeted after the oil shock” of 2014, the Canadian economy has lost a major driver of future growth.