Economic Forecast 2024: Key Trends and Insights for Entrepreneurs (Canada and BC)

I enjoyed attending the "2024 Fiscal Update: Trends and Insights for Entrepreneurs" event, part of the Business Growth Series hosted by the Greater Vancouver Board of Trade . The keynote speaker, Mr. Pierre Cléroux, Vice President, Research and Chief Economist at BDC , delivered an enlightening presentation that demystified complex economic trends and provided actionable insights for entrepreneurs. Here are the key takeaways and my additional perspectives on strategic planning.

Key Economic Indicators and Trends

1. Interest Rate Reduction Forecast Mr. Cléroux discussed the necessity of increasing interest rates to combat inflation, which significantly impacted the population, especially regarding mortgage financing. The good news is that interest rates are expected to decrease to around 4% in 2024 and potentially to 3% in 2025. However, many Canadians will still face high rates of mortgage renewals, which remains a serious concern.

2. Population Growth and Savings Rate Canada's population grew by 2.9%, necessitating continued support for further growth. Canadians have become more cautious, with current savings rates being three times higher than in 2019. This increased savings rate has decelerated the economy, helping reduce inflation and providing a security buffer. This trend is promising as it suggests a potential surge in consumer spending, which could stimulate economic growth.

3. Inflation Dynamics While inflation is decreasing, challenges remain:

• Service Inflation: 4.1%
• Wage Inflation: 4.7%
• Core Inflation (excluding mortgage financing): 1.8%, close to the Bank of Canada's target.

Regional Focus: British Columbia

British Columbia (BC) mirrors these national trends but has unique characteristics:

• Real Estate Market: BC saw a 25% decline in the real estate market, yet the average price only decreased by 9%. Over the last decade, property prices increased by an average of 65%.
• Construction Activity: BC leads Canada in residential construction, a critical factor given the 3% population growth.
• Economic Growth Forecast: BC is projected to grow by 0.8% in 2024 and 1.9% in 2025.

Addressing Labor Shortages

One of the most pressing issues highlighted by Mr. Cléroux is labour shortages:

• Demographics: 20% of the population is over 65, with a significant portion nearing retirement. Over 22% are near retirement, while only 13% of the population is young enough to replace them.
• Retirement Wave: The number of people retiring is unprecedented, creating additional pressure on wages, which are growing at 5%.

Strategies for Entrepreneurs

To navigate these challenges, Mr. Cléroux suggested three key strategies:

1. Invest in Technology and Automation: Embracing technology can mitigate labour shortages and boost productivity.
2. Develop a People Strategy: Focus on attracting, retaining, and developing talent.
3. Expand Your Talent Pool: Look beyond traditional sources to find and cultivate new talent.

Additional Perspectives

While Mr. Cléroux provided a robust analysis, here are three additional angles from my perspective:

1. Leveraging Canada's Educated Workforce Canada boasts one of the most formally educated populations globally, with 66% of adults completing post-secondary education (OECD's 2024 data). Despite this, Canada lags behind its peers in productivity. According to the OECD, Canada ranks 29th out of 38 OECD countries in terms of labour productivity (The Globe and Mail). To close this gap, it's crucial to convert this educational potential into productivity gains through continuous learning, upskilling, and integrating advanced technologies.

2. Economic Diversification Canada's economy heavily relies on commodities such as oil and gas, mining, and lumber, and its economic health is closely tied to the U.S., which receives 75% of its exports. This dependence poses risks. Canada must invest in high-value industries and diversify its trading partners to enhance economic resilience. For instance, advancing sectors like technology, green energy, and advanced manufacturing can provide more sustainable growth and higher margins.

3. Balancing Growth with Risk Aversion Canadians are known for their cautious approach, reflected in a savings rate that is significantly higher than that of Americans. While this prudence has advantages, such as financial stability, it can also inhibit economic dynamism. Encouraging calculated risk-taking and entrepreneurial ventures is essential. For comparison, the U.S. household savings rate is around 3.8%, whereas Canada's has been around 6.2%. Strategies to foster a culture that balances risk with innovation could unlock significant economic potential.

Conclusion

The insights from the "2024 Fiscal Update: Trends and Insights for Entrepreneurs" event underscore the importance of strategic adaptation in evolving economic landscapes. Entrepreneurs must leverage Canada's highly educated workforce, diversify economic activities beyond traditional commodities, and balance prudent financial management and entrepreneurial risk-taking.

As we move forward, it is crucial to integrate these strategies to navigate the complex economic environment effectively. Businesses can survive and thrive by doing so, contributing to a robust and resilient Canadian economy.