The Vancouver Island Economic Alliance’s annual Economic Summit returned to an in-person event this year, with over 500 delegates from across Vancouver Island gathering in Nanaimo October 26 & 27 to discuss our current and future business ecoscape.
A much-anticipated session at the conference is the annual State of the Island Economic Report, compiled and delivered by MNP Partner and Senior Economist Susan Mowbray.
“Around the globe, economies bounced back in 2021,” says the report, “with governments continuing to find ways to allow more activity to take place despite the ongoing pandemic. B.C. fared well and the underpinning of continued migration from other parts of Canada increased demand in a number of key sectors.”
Challenges over the past year included continuing travel restrictions, which limited tourism and hospitality sector recovery, and a growing population, which put pressure on housing stock, reducing affordability. The report attributes rising inflation to the sizeable government stimulus in 2020 and 2021, with a resulting increase in the Bank of Canada’s interest rates both reducing real estate activity and dampening the labour market.
The report forecast continued economic growth into 2023, albeit at a slower rate, citing continuing migration and a recovering tourism sector as key elements in supporting that growth. It also highlighted the need for local food security as the world continues to grapple with supply chain issues, spotlighting challenges with the Island’s Agricultural Land Reserve and the need for innovative approaches for improving how it’s used and supports food production.
Douglas talked to Susan ahead of her presentation to discuss her findings as Vancouver Island enters the third year of a global pandemic amid ever-increasing anxiety about the twin effects of inflation and climate change.
We’re in the third year of the pandemic, and hearing that we’ll still be feeling the effects in 2023, only fully emerging from it in 2024. Would you agree?
I think it’s time to stop talking about recovery and start thinking about our new normal. What does normal look like now? Yes, we’re experiencing inflation as we emerge from the pandemic, and it’s turned out that it’s a little stickier than we wanted, so that’s a short-term effect that we are still grappling with, but it’s time to look forward, not back.
There’s also talk of a recession. If there is one, it’s likely to be quite different than the recession of 2008.
Let’s talk about how recession is defined because people define it differently. There’s the technical definition of a recession, which is just around slowdown, negative GDP growth for a certain number of periods. Another definition of recession that happens if global economic growth falls below 3%. So what I would say is that we’re definitely heading into a period of slower economic growth.
We need to tame inflation, and there’s no easy way to do that. It’s hard and it’s potentially going to be painful. What’s really different between now and 2008 is what’s happening in the labour market. We have a shortage of labour in a lot of sectors. A lot of employers are having difficulty filling vacant positions.
So if economic activity slows and the demand for labour slows, that should help us correct the imbalance in the labour market that we’re experiencing right now.
There were no surprises in the report, but some of our expectations around tourism didn’t exactly play out as we thought they would. For example, though cruise ships returned to Victoria, their numbers were down, with fewer passengers disembarking to spend their money on the Island. So those numbers are not where we hoped they would be, but we are seeing more of a bounce back that should continue in 2023.
We have new data available with the release of the 2021 census, and that really excites us. We were interested to see increases in income, and reduction of poverty; the question is, was that a function of government supports during the pandemic or is it part of a longer term trend where we are seeing reductions in poverty. We will be tracking those data sets to discover the reasons behind the positive trend in income growth.
The other exciting news is we are starting to see more data about Indigenous economic growth, and we’re now able to start analyzing that growth and the impact it will have within the larger economy. That’s information we didn’t have as much access to in the past, and information the business community is asking for. The Indigenous economy is an important part of our regional economy, so it’s not surprising that people are asking for the data.
What’s changed for 2021 versus 2020?
Well, the housing issue is worse. Prices are still too high and people are finding themselves forced to move off Island to find an affordable place to live. That is an issue across Canada, and one we need to focus on if we’re to see continued economic growth here.
Had you predicted how many businesses would not survive the pandemic, and if so, did the numbers live up to expectations?
We hadn’t done any forecasting around business survival, but we were expecting a big decline in the number of businesses continuing to operate post-pandemic. Those numbers didn’t materialize. The business community remained fairly stable.
It’s not to say there weren’t any closures, but any that didn’t survive were quickly replaced by those starting new businesses. We say growth in professional services, for instance, while some whose success hinges on visitor traffic were forced to close.
Fast forward to Fall of 2023. What will have changed, or not changed, about our regional economy?
There’s a lot of uncertainty right now, brought about by global forces, like the war in Ukraine, for instance, so it’s really hard to predict what will happen when we have no control over that.
A year from now we are likely still going to be talking about labour issues, and probably inflation because it takes a while for those policy moves to dissipate. But by next Fall perhaps we’ll have more clarity around some of the cloudiness right now.
The State of the Island Economic Report is available for purchase through the Vancouver Island Economic Alliance. Visit viea.ca for details.