Download Economic and Financial Profile of Québec

ROMANIA, SEPTEMBER 2008
QUEBEC
IS
ADJUSTING
TO
ECONOMIC
GLOBALIZATION
http://www.finances.gouv.qc.ca
PLAN OF THE PRESENTATION
1
2
3
4
5
Quebec’s Economy
International Situation
Adjustment in Quebec
Economic Forecast
Conclusion
QUEBEC’S
ECONOMY
Quebec at a Glance
• The largest province in Canada
• Population of 7.7 million
• GDP of US$245 billion (PPP)
• Per capita GDP of US$31 845 (PPP)
• International exports: 36.3% of GDP
• Free trade between Canada, the
States and Mexico
United
QUEBEC’S
ECONOMY
A Modern and Diversified
Economy
Distribution of Real GDP by Major Sector in 2007
Natural resources : 2.2%
Construction : 5.8%
Manufacturing : 18.9%
Services : 73.1%
NTERNATIONAL
SITUATION
Greater Economic Integration
•
Freer trade
•
Fragmentation of the production process
•
Specialization in production
•
Offshoring of part of production
– Advances in technology
– Improvements in transportation
– Many agreements and international policies
NTERNATIONAL
SITUATION
Offshoring of Production
• Offshoring of part of global production
to emerging economies
Hourly Pay of Manufacturing Workers
(American dollars, 2006)
28.76
• Hourly pay of workers is lower than in
advanced countries
25.74
23.82
20.20
• In particular, China has gained
substantial market shares throughout
the world
6.43
2.75
0.67
U.S.
European Japan
Union
Canada Taiwan
Mexico
China
NTERNATIONAL
SITUATION
Substantial Growth in World
Trade
• The internationalization of production has
resulted in substantial growth in
international trade
• The advanced economies have benefited
from cheap goods and services and have
become more specialized in high
technology goods:
Global Exports of Goods and Services
(Billions of American dollars)
16000
14000
12000
10000
8000
– Germany and the United States are the
world’s largest exporters
6000
4000
2000
1990
1994
1998
2002
2006
NTERNATIONAL
SITUATION
Employment in the Manufacturing
Sector in Decline Compared to
Services
• Greater demand for services
• The total number of manufacturing jobs in
the world is up because of job creation in
certain emerging countries
• Thanks to productivity gains, global
manufacturing production continues to rise
Share of Employment by Sector in the
Global Economy
(Percentage of total employment)
80
70
60
50
Manufacturing
Services
40
30
20
1980
1985
1990
1995
2000
2005
DJUSTMENT
IN QUEBEC
Quebec Is Under Pressure on a
Number of Fronts
• Significant appreciation of the Canadian dollar versus the American dollar
• High energy costs
• Economic difficulties in the United States
• Transformation of global trade
• Other challenges facing Quebec:
– Productivity
– Demographic changes
DJUSTMENT
IN QUEBEC
A Difficult International Situation:
Oil Price and a Dollar That Are
High and Volatile
Canadian Dollar
Oil Price
(American dollars)
(West Texas Intermediate,
American dollars )
140
1.10
120
1.00
100
0.90
80
0.80
60
40
0.70
20
0.60
2002
2003
2004 2005
2006
2007 2008
2002
2003 2004
2005 2006
2007
2008
DJUSTMENT
IN QUEBEC
Changes in International Trade Are
Having a Major Impact on Quebec
Chinese Market Shares in the
United States
Share of the American Market
(Percent)
(Percent)
2000
60
2000
16.5
2007
2007
40
8.2
20
3.8
Textile
Products
Electrical
equipment
Clothing
Impression
Computer,
electronic
Furniture
0
2.9
Quebec
China
DJUSTMENT
IN QUEBEC
Quebec Is Adjusting to Economic
Globalization
• Manufacturing job losses in North
America:
– In Quebec, one out of every five jobs
Manufacturing Job Losses Between 2002
and 2007
(Thousands)
United States
Canada
– In Canada, one out of every eight jobs
Quebec
-106
-241
– In the United States, one out of every
eight jobs
-1 375
DJUSTMENT
IN QUEBEC
Job Losses Concentrated in Low
Value-Added Sectors
Employment, Wages and Salaries in Quebec
Job creation
Weekly pay
(Units)
(Dollars)
2002-2007
2007
-21 500
578
-10 500
690
Furniture and related products
-4 300
750
Wood products
-3 100
741
500
997
Non-metallic products
1 000
778
Metal products
2 300
794
21 200
758
39 200
777
48 500
885
Manufacturing sector1
Clothing
Textile plants and textile products
-39 400
Electrical equipment, appliances
and components
Services2
Warehousing and transportation1
Finance, insurance, real estate
and leasing1
Professional, scientific and technical
services1
+108 900
1: According to Statistics Canada’s Labour Force Survey.
2 : According to Statistics Canada’s Survey of Employment, Payrolls and Hours.
DJUSTMENT
IN QUEBEC
Exports Have Peaked
Quebec’s Exports of Goods and Services
(In millions of chained 2002 dollars)
100 000
90 000
80 000
70 000
60 000
50 000
40 000
30 000
20 000
10 000
0
1989
1992
1995
1998
2001
2004
2007
DJUSTMENT
IN QUEBEC
Quebec Continues to Increase Exports
in High Value-Added Sectors
Cumulative Growth in Merchandise Exports from 2002
to 2007 in Quebec
(Percent)
Aircraft and parts
579
Chem. prod. and oil derivatives
409
Machinery and equipment
235
Primary metals
235
Total
Pulp and paper
203
37
DJUSTMENT
IN QUEBEC
Quebec Must Meet the
Productivity Challenge
Productivity In 2006
• Quebec’s productivity lags significantly
behind that of its trading partners
(Real GDP per hour worked, dollars)
57.4
49.7
• For Quebec to equal Canada’s real GDP per
hour, it would have to double its growth in
hourly production each year for 15 years
44.4
United States
Canada
Quebec
DJUSTMENT
IN QUEBEC
Demographic Changes Will Have
an Impact on the Economy
Number of people of working age (age 15
to 64) as a proportion of the number of
people age 65 or over
(Percent)
Projection of the population age
15 to 64 in Quebec
5 500 000
9.0
5 450 000
5 400 000
5 350 000
5.0
5 300 000
5 250 000
2.0
5 200 000
5 150 000
5 100 000
1971
P: Statistics Canada
2001
P
2031
2006
2011
2016
2021
2026
2031
FORECAST
SSUMPTIONS
No Recession Expected Despite
a Slowdown in 2008 and 2009
Real Gross Domestic Product
(Percentage change)
2.4
2.0
2.0
1.5
2003-2007
P: 2008-2009 Budget projection
2007
2008P
2009P
FORECAST
SSUMPTIONS
Contribution of the External
Sector
Contribution of the External Sector
(As a percentage of real GDP)
2
1
0
-1
-2
-3
-4
1995
1997
P: 2008-2009 Budget projection
1999
2001
2003
2005
2007
P
2009
FORECAST
SSUMPTIONS
Domestic Demand
Remains Vigorous
Contribution of Domestic Demand
(As a percentage of real GDP)
5
4
3
2
1
0
-1
P
1995
1997
1999
P: 2008-2009 Budget projection
2001
2003
2005
2007
2009
ONCLUSION
The Quebec Government Is
Taking Action
•
Balance the budget
•
Reduce personal and corporate taxes
•
Encourage investment
•
Implement an infrastructure plan ($30 billion over 5 years)
•
Tackle the public debt and control spending
•
Support the transformation of the economy
ONCLUSION
Quebec Continues to Adapt to the
International Situation
•
Jobs have moved from manufacturing to the service sector
•
Manufacturing output is shifting to high value-added sectors requiring
skilled workers
•
Companies are investing to boost productivity
•
The external sector remains under pressure