GDP drop in N.W.T. last year shows territory’s economy ‘stagnating,’ researcher says
N.W.T. was 1 of 2 jurisdictions in Canada to see its Gross Domestic Product drop between 2022 and 2023
New economic data from Statistics Canada show that the N.W.T.’s economy is “stagnating,” according to one Yellowknife economist.
And Graeme Clinton, owner of the research firm Impact Economics, says it’s not a big surprise, as the territory’s diamond mines are past their peak production and are preparing for closures.
“There’s not a lot of activity coming in behind them, such that we can expect significant growth going forward,” Clinton said.
A report last week from the N.W.T. Bureau of Statistics, based on StatsCan data, says the territory’s Gross Domestic Product (GDP) fell by 0.4 per cent between 2022 and 2023. Newfoundland and Labrador was the only other jurisdiction in Canada to also see a drop in GDP over that period.
GDP represents the overall value of all goods and services produced in the economy within a specific year and is one way to measure economic growth.
Acting territorial statistician Jeff Barichello says the GDP drop last year is owing to the territory’s dependance on “goods-producing industries” — namely mining, oil, and gas — which have been fluctuating.
Barichello adds that while the service sectors — including health care, finance, and public administration — have returned to pre-pandemic levels, the goods-producing industries remain affected.
Economy ‘insulated’ by federal transfers
Clinton explains that the territory typically receives a significant amount of its annual revenues through federal transfer payments, including about $1.77 billion this year.
These payments, which increase slightly each year, primarily fund public administration, education, and health care — key service-producing sectors.
“The total amount of federal dollars is almost half of our territory’s total gross output … meaning half of our economy is insulated from the ebbs and flows of the market economy,” Clinton said.
Despite the decline in the mining and oil sectors, Clinton says the territory’s economy remains relatively stable due to this consistent federal support, which is “largely funded by Canadian taxpayers.”
Clinton argues that the territory’s economy outside the public sector is neither large enough nor growing.
Clinton says that as the Diavik diamond mine, scheduled to close in 2026, and the Gahcho Kué mine, expected to close around 2030, wind down, the economic landscape of N.W.T. will further shift.
These closures are expected to have both direct and indirect effects on the economy, as the mines employ over 1,400 people in the territory.
“We’re already seeing some of this now. By this time next year, when we get the 2024 numbers, we may start to see a slowdown in mining activities,” Clinton said.
The data show that diamond mining activities in the N.W.T. declined slightly, by 2.1 per cent, between 2022 and 2023.
Clinton says that as the mines close over the next three to eight years, and nothing replaces them, “we can expect a much smaller economy than we have today.”
Increase in tourism-related revenue
Other sectors saw a boost between 2022 and 2023, including the accommodation and food-services sector. Those were among the hardest hit by the pandemic and they saw a 12.5-per-cent increase between 2022 and last year.
Clinton attributes this growth not only to increased tourism but also to “job tourism.”
“A lot of people are coming to the Northwest Territories to participate in our economy through employment, such as at the Giant Mine remediation project,” Clinton said.
He adds that these workers contribute to growth in the territory’s accommodations, food services, and recreation sectors, as well as others.
Related stories from around the North:
Canada: Inuit push for land protection with focus on social economy, Eye on the Arctic
Norway: Will the green transition be the new economic motor in the Arctic?, Eye on the Arctic
Russia: Huge budget deficit is building up in Russia’s economy, The Independent Barents Observer
