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“The strength of Quebec’s economic rebound from COVID-19 has been nothing short of remarkable.”
That is the conclusion of a new report from Scotiabank Economics that found the province’s economy not only growing at record levels — even zero gains for the rest of this year would result in annual growth of 6.5% — but also poised to lead all Canadian provinces in economic expansion for the first time in recorded history.
“COVID-19 has unquestionably been a crisis of the highest magnitude in Quebec, but the province’s economy has weathered the worst of the storm and looks to be coming out of the pandemic in better shape than many of its peers,” Senior Economist Marc Desormeaux writes in the report, titled Miracle on Saint-Laurent Street, released this week.
Several factors help explain Quebec’s economic performance:
- Household consumption: Quebec was hit harder than other provinces in the first wave of COVID and enacted stronger restrictions than elsewhere in the country, with an unsurprising drop in GDP the result. But the restrictions helped reduce infection rates and were eased more quickly than elsewhere, and Quebecers began to spend to a greater degree than neighbouring Ontario.
- Strong balance sheets entering the pandemic: In the three years before COVID, full-time employment rose more than in any period since 2000. Wages and salaries also surged, and Quebecers saved during that period, leaving them with more spending room when things opened up.
- Governments to the rescue: Quebec’s share of approved Canadian Emergency Wage Subsidy claims exceeded its share of working-age population in 2020. The provincial government also offered generous income tax deferrals at the pandemic’s onset.
- No auto lag: Ontario depends on cars and parts for about a third of its exports, so it suffered as the industry dried up, revived, then slowed due to semiconductor shortages. Quebec, meanwhile, with a smaller auto industry footprint, saw exports outpace those of Ontario and the rest of Canada.
Besides the economic factors, one of the more surprising trends has been the growth in interprovincial migration from Ontario to Quebec, the Scotiabank report says. In the second quarter this year, net outflows from Ontario to Quebec — a reflection of the prevalence of remote working situations and relatively more affordable housing in Quebec — hit their highest-ever recorded level.
“It’s too early to say whether Quebec will see structurally stronger growth post-COVID-19, but we estimate that recent interprovincial migration gains — if sustained — could permanently lift GDP 1% higher by the end of this decade,” Desormeaux writes in the report.
To read the complete Scotiabank Economics report, click here.