Business investment a key to Canadian economic recovery

Alberta had above-average annual growth in investment from 1990 to 2014 but since 2014 investment has stagnated

Increasing business investment will be key to help Canada recover from the COVID recession, but provincial performance over the past 30 years shows mixed results, according to a new study released Tuesday by independent public policy think-tank the Fraser Institute.

“Business investment is crucial for improving productivity and increasing living standards, so it’s important to understand exactly how the provinces are faring to attract investment,” said Steven Globerman, a Fraser Institute senior fellow and co-author of Capital Investment in Canada’s Provinces: A Provincial Report, in a news release.

“While the investment laggards are still lagging, even the previous bright spots in Canada’s business investment landscape are currently dim. Given how important business investment will be post-recession, policymakers should pursue policies, including implementing regulatory reform and competitive tax rates, that are known to attract investment.”

The study measures growth in business investment at the provincial level from 1990 to 2014 and from 2014 to 2018, the most recent year of comparable data.

Calgary skyline

The report said Alberta had above-average annual growth in investment from 1990 to 2014 but since 2014 investment has stagnated. The province averaged just 0.1 per cent annual growth from 2014 to 2018.

“When looking at specific asset categories, the dramatic decline in Alberta’s relative investment performance post-2014 primarily reflects a sharp drop-off in non-residential, ie., business investment. Interestingly, the annual average growth rate of investment in residential assets in Alberta remained above the national average after 2014. Indeed, and unlike the case for the growth rates of total net fixed assets, relative provincial performances with respect to the annual growth of net residential fixed asset investment were relatively constant from 1990 to 2018,” said the report.

“Alberta experienced the fastest relative average annual growth in the net stock of non-residential assets among all provinces from 1990 to 2014, whereas it posted the next-to-slowest average annual growth rate in these assets from 2014 to 2018.”

 

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