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Economic and Financial Profile of Québec

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Economic and Financial Profile of Québec Powered By Docstoc
					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 United States and Mexico

QUEBEC’S ECONOMY

A Modern and Diversified Economy

Distribution of Real GDP by Major Sector in 2007
Natural resources : 2.2% Services : 73.1%

Construction : 5.8% Manufacturing : 18.9%

NTERNATIONAL SITUATION

Greater Economic Integration

•
• • •

Freer trade
Fragmentation of the production process Specialization in production Offshoringin technology production – Advances of part of
– Improvements in transportation – Many agreements and international policies

NTERNATIONAL SITUATION

Offshoring of Production
Hourly Pay of Manufacturing Workers
(American dollars, 2006)
28.76 25.74 23.82 20.20

• Offshoring of part of global production to emerging economies • Hourly pay of workers is lower than in advanced countries • In particular, China has gained substantial market shares throughout the world

6.43 2.75 0.67 U.S . E uropean Japan Union C anada Taiwan Mexico C hina

NTERNATIONAL SITUATION

Substantial Growth in World Trade
Global Exports of Goods and Services
(Billions of American dollars)
16000 14000 12000 10000 8000 6000 4000 2000 1990 1994 1998 2002 2006

• 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:
– Germany and the United States are the world’s largest exporters

NTERNATIONAL SITUATION

Employment in the Manufacturing Sector in Decline Compared to Services
Share of Employment by Sector in the Global Economy
(Percentage of total employment)
80 70 60 50 Manufacturing 40 30 20 1980 1985 1990 1995 2000 2005 S ervices

• 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

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
(American dollars)
1.10 1.00 0.90 0.80 0.70 0.60

Oil Price
(West Texas Intermediate, American dollars )
140 120 100 80 60 40 20
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
Share of the American Market
(Percent)
2000 2007 16.5

Chinese Market Shares in the United States
(Percent)
60 40

2000

2007
8.2

20 0

3.8
Furniture Impression lectrical E equipment Computer, electronic Textile roducts P Clothing

2.9

Quebec

C hina

DJUSTMENT IN QUEBEC

Quebec Is Adjusting to Economic Globalization
Manufacturing Job Losses Between 2002 and 2007
(Thousands)
United S tates C anada Quebec

• Manufacturing job losses in North America:
– In Quebec, one out of every five jobs – In Canada, one out of every eight jobs

-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
Job creation
(Units)

Employment, Wages and Salaries in Quebec
Weekly pay
(Dollars)

2002-2007 Manufacturing sector1 Clothing -21 500 -39 400

2007

578

Textile plants and textile products
Furniture and related products Wood products Electrical equipment, appliances and components Non-metallic products Metal products Services2 Warehousing and transportation1 Finance, insurance, real estate and leasing1 Professional, scientific and technical services1

-10 500
-4 300 -3 100 500 1 000 2 300

690
750 741 997 778 794

21 200 +108 900 39 200 48 500

758 777 885

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 579 409 235 235 203 37

Chem. prod. and oil derivatives Machinery and equipment Primary metals Total Pulp and paper

DJUSTMENT IN QUEBEC

Quebec Must Meet the

Productivity Challenge
Productivity In 2006
(Real GDP per hour worked, dollars)
57.4 49.7 44.4

• Quebec’s productivity lags significantly behind that of its trading partners • 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

United S tates

C anada

Quebec

DJUSTMENT IN QUEBEC

Demographic Changes Will Have an Impact on the Economy
Projection of the population age 15 to 64 in Quebec
5 500 000 5 450 000 5 400 000 5 350 000

Number of people of working age (age 15 to 64) as a proportion of the number of people age 65 or over
9.0

(Percent)

5.0
5 300 000 5 250 000

2.0

5 200 000 5 150 000 5 100 000

1971

2001

2031

P

2006

2011

2016

2021

2026

2031

P: Statistics Canada

FORECAST SSUMPTIONS

No Recession Expected Despite a Slowdown in 2008 and 2009
Real Gross Domestic Product
(Percentage change)
2.4

2.0 1.5

2.0

2003-2007

2007

2008P

2009P

P: 2008-2009 Budget projection

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

1999

2001

2003

2005

2007

2009

P

P: 2008-2009 Budget projection

FORECAST SSUMPTIONS

Domestic Demand Remains Vigorous
Contribution of Domestic Demand
(As a percentage of real GDP)

5 4 3 2 1 0 -1
1995 1997

P

1999

2001

2003

2005

2007

2009

P: 2008-2009 Budget projection

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 valueadded sectors requiring skilled workers
Companies are investing to boost productivity The external sector remains under pressure