ECONOMIC DIVERSITY
Key to wealth generation
The diversification of an investment portfolio is an important feature that protects against risk and provides opportunities for growth.
It’s the same for an economy. A new study by the Conseil du patronat, Quebec’s largest employer group, says diversification of the economy is a key asset for Quebec as it strives to generate more wealth and prosperity.
“It’s easier for companies to form and grow if they can develop in a sophisticated and diverse economy,” says Conseil economist Norma Kozhaya.
“It’s easier to find customers, suppliers, specialized labour and technical expertise.”
The province has its foot in a lot of different industries, from agriculture, forestry and other natural resources to construction, manufacturing, retail, transportation equipment, financial services, cultural industries and business services. There’s also a big public sector that generates a significant share of GDP.
Some of the numbers in the Conseil study are eye- openers. Agriculture and forestry get a lot attention in Quebec but together they account for barely 1.6 per cent of the provincial economy. Mining and other resource extraction also generate a lot of headlines but produce just 1.1 per cent of GDP.
The biggest sector is financial services ( including insurance and real estate services), which accounts for 17.5 per cent of economic activity. Manufacturing, often left for dead in Quebec, is still alive and kicking with a 14 per cent share of the economy — a number that’s actually bigger than Ontario’s 12.9 per cent.
“The Quebec economy is one of the most diversified and integrated in North America,” argued Kozhaya. By comparison, the Alberta economy has put a lot of its eggs in one basket by depending so heavily on oil and gas. We’re seeing the down side of that today.
Ontario, for its part, is heavily weighted toward financial services with a nearly 23 per cent share. That’s good during boom times but leaves Ontario exposed to a downturns.
Health care and education are a bigger part of the economy here than in Ontario or the U. S. That’s both good and bad when you consider that while they do provide jobs and income, they are ultimately a significant cost to the Quebec taxpayer.
Public administration — another name for big government — is a significant presence in Quebec, with a 7.5 per cent share of the economy. But it’s not as big as you might think when you look at the importance of government in the U. S. ( 13.2 per cent of economic activity).
Kozhaya points out that beyond the numbers, Quebec has done well in many different sectors from pharmaceuticals to video games and that kind of diversification allows it to react more quickly to changes in global demand.
The study is the first in a series of reports the Conseil is releasing to help promote growth and prosperity across the province.
According to comparisons with OECD economies, Quebec ranks 14th in GDP per capita, just ahead of Italy, Spain and South Korea but behind Britain, Japan, France and Finland.
Kozhaya said surveys show Quebecers enjoy a good quality of life but that perception is threatened by demographic pressures that will devastate the workforce in coming years and by growing public debt that until now has paid for most of the province’s generous social programs.
At the same time, Quebec’s trade position is worsening as China and other emerging economies take business away from Quebec companies. The trade balance went from a $ 4.2 billion surplus in 2002 to a $ 24.3 billion deficit in 2013.
Conseil president Yves- Thomas Dorval said entering foreign markets is essential if Quebec is going to compensate for the slowdown in domestic demand that will come from an aging population.
Another important priority is to develop and train the workforce to take advantage of new opportunities and fill the holes left by the wave of retiring Baby Boomers.