• Control of COVID-19 remains an advantage for PEI.
  • Exposure to tourism will likely hold back the Island’s near-term recovery.

Canada’s smallest province continues to carry Canada’s smallest COVID-19 case load. PEI still has not recorded a single COVID-19 death, and its lockdown measures—according to the Oxford University index—are less severe than even those in the other Atlantic Provinces. That enabled relatively unrestricted mobility and one of the smallest economic contractions of any province last year.

Yet, international and interprovincial travel restrictions weigh heavily on the Island economy given its heavy reliance on the tourism sector. The sector will continue to face significant difficulties so long as COVID-19 restrictions remain in place. Indeed, tourism indicators point to still-very-weak seasonal activity, and cruise ship visits to Canada have been banned until next year. More positively, the Atlantic travel bubble is set to reopen this month and could help tourism activity alongside further vaccination progress..

PEI’s agricultural sector had a positive 2020; early indications for this year’s growing season are mixed. Farm cash receipts surged to an all-time high last year—supported by strong potato prices—but operating costs are also on the rise and last year’s drought—which acutely impacted the potato crop—resulted in the sharpest inventory value decline in over a decade. Weak starting inventories could hurt farms’ bottom lines in 2021, but yields should normalize if weather conditions are more supportive. Dairy product receipts also rallied to end 2020 and begin this year on firm footing, after struggling with storage issues early last year.

Prospects are also mixed for the Island’s wide range of manufacturing industries. On the one hand, food manufacturing—concentrated in seafood and frozen food and accounting for an outsized industry share in the province—looks likely to continue to benefit from strong pricing. On the other, purchases from niche PEI durable goods industries such as aerospace and engine repair will likely be held back by COVID-19-related uncertainty.

As most elsewhere in Canada, PEI’s housing market has gotten off to a roaring start this year. Residential construction investment—concentrated in single-family dwellings—is up more than 50% y/y ytd as of April, supported by still-low interest rates, torrid price gains, and a desire for more space during the pandemic. As of May, repeat home sales were up almost 80% versus the first four months of last year. The key question for housing is how quickly immigration can resume—PEI witnessed the strongest population growth of any province during 2015–19, and newcomers accounted for three-quarters of those gains—more than in any other province.

Stepped-up infrastructure outlays—announced late last calendar year in PEI’s capital budget—continue to factor into our forecast. The province aims to keep capital expenditures at about $196 mn (2.6% of nominal GDP) this fiscal year in order to bolster the economic recovery. Read our take on PEI’s 2021–22 budget here.


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