According to the Atlantic Provinces Economic Council, and the many provincial politicians who have repeated the phrase, “the Prince Edward Island economy is on a tear” (as in “tearing it up,” not weeping). This is a good thing and a trend that we should hope to see continue.
CFIB’s Business Barometer® Index, our own measure of what’s happening in the small- and medium-sized business economy, has been showing P.E.I.’s performance consistently rivalling that of most provinces since 2015. We’ve seen relatively strong population growth be a boon for many industries, notably real estate and residential construction, and a lower Canadian dollar has helped to boost our exports and tourism industry.
Earlier this month, Statistics Canada confirmed what many of us were expecting when it released its 2017 provincial statistics for gross domestic product (GDP) - the sum of all goods and services produced in an economy. The Island’s GDP showed real growth of 3.2 per cent last year, putting our economic growth for 2017 ahead of all but two other provinces. Strong GDP numbers like that may help politicians and bankers sleep well at night, but our performance is something we should all be proud of.
With few large corporations calling P.E.I. home, the driver of GDP growth on the Island has been our small- and medium-sized businesses. When small businesses do well, we all benefit. They invest in their businesses and communities, create employment opportunities and wage growth for their neighbours, and generate the economic activity which delivers the tax revenues to pay for public services Islanders value.
We need this growth.
While our robust performance is a good sign, we are starting from last place. When we measure our GDP against our population (GDP per capita), we still lag behind the rest of the country and have plenty of room to grow before we can say that we’ve closed that gap.
Even though our population has been growing in recent years, it continues to age and will become more of a strain on expensive public programs, namely health care. We are already highly taxed, leaving government little room to entertain any tax hikes. Barring bailouts from the federal government, which are unlikely considering its projected deficits, or substantial cuts to government programs, there is only one way P.E.I. will be able to pay for these services: keep growing our economy.
GDP doesn’t tell us everything, but it’s our most objective measure of economic performance. Given the challenges of our aging population, our GDP needs to stay “on a tear.” While economic development has always been important, it has never been more important. For P.E.I., this means helping small- and medium-size businesses grow. If we don’t support the drivers of our economy, this tear may very well end in tears.
Erin McGrath-Gaudet, Director, PEI & Intergovernmental Policy
Jordi Morgan, Vice-President Atlantic