Operating Context - PrairiesCan 2022-2023 Departmental Plan
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As we enter the third year of the COVID-19 pandemic there is, unfortunately, not a clear end in sight. This may be the year we finally see the other side, but it could also give us another year of the pandemic. We are seeing the easing of restrictions, as we pivot towards the reality of “living with the virus.” The possibility of reintroducing restrictions remains as variants and public health concerns continue to emerge. There is a great deal of uncertainty and no one is sure, when things will finally start to feel like “normal.” The economy reflects this ambiguity. Despite the unyielding heightened uncertainty, economies are still expected to grow robustly in 2022 and beyond, as markets adapt to changing realities and risk.Endnote 1 However, the economy is struggling to gain traction as growth forecasts are dampened just a little more with each successive revision. In addition, there are increasing global geopolitical pressures. The big economic challenges we currently face will likely continue, most notably supply chains, labour market pressures, and inflation. There remains optimism that the resilience of the economy will prevail, and new and emerging opportunities will take hold in the face of these challenges, even if that path is longer than initially thought. After weaker than expected growth across the Prairies in 2021, Alberta’s economy is forecast to grow 4.8% in 2022, followed by Saskatchewan (+3.9%) and Manitoba (+3.8%).Endnote 2 Economic growth could be much stronger in oil-producing provinces if the elevated oil and gas prices in early 2022, related to the geopolitical instability in Eastern Europe, persist or remain.
Businesses and households endure the brunt of the pandemic, taking on debt to maintain and adapt to shifting economic realities, and are becoming more financially vulnerable as it continues.Endnote 3,Endnote 4 This is particularly true in the Prairies, having just weathered the 2015-16 oil price recession and entering the pandemic in a weakened state. Businesses in the Prairies will continue to grapple with a number of issues. The elevated levels of inflation will put a strain on business balance sheets as the cost of their expenses increases. With the spectre of rising interest rates, the cost of borrowing for both businesses and households will increase, which could exacerbate already vulnerable financial positions.Endnote 5 The prominent supply chain issues are expected to continue, which will cause frustrations in meeting demand. The struggle to find workers, particularly in certain industries, will likely continue.Endnote 6 This year could be a make-or-break year for businesses that have been barely holding on and that will become insolvent in the face of low revenues and rising expenses.
The Global economy is also continuing to transition towards low carbon intensive energy, and this will remain a challenge for the Prairies as they adapt to a different economic reality for resources. The instances of natural disasters and extreme weather, including fires, flooding, and drought, related to climate change, have increased in intensity and frequency in the Prairies and will continue to challenge the region.
Despite these challenging times, businesses continue to demonstrate resilience and determination, innovating to meet the tests of the pandemic, climate change, and a shifting economy. There are opportunities in traditional and emerging sectors to adapt to a changing economy and build towards the economy of the future. Resources, particularly energy and oil and gas, remain one of the region’s biggest strengths. Potential in the Prairies extends well beyond oil and gas into a diverse and growing economy including, clean technology, value-added agriculture, life and health sciences, digital technology, and advanced manufacturing.Endnote 7,Endnote 8 The Prairies are home to a young, entrepreneurial and skilled workforce that represents an indispensable asset to an economy that will need to transform.Endnote 9
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