QUEBEC IS ADJUSTING TO ECONOMIC GLOBALIZATION

1
QUEBEC IS ADJUSTING TO ECONOMIC
GLOBALIZATION

• ROMANIA, SEPTEMBER 2008

http//www.finances.gouv.qc.ca
2
PLAN OF THE PRESENTATION
1 Quebecs Economy

• 2 International Situation

3 Adjustment in Quebec
4 Economic Forecast
5 Conclusion
3
Quebec at a Glance
QUEBECS ECONOMY

• The largest province in Canada
• Population of 7.7 million
• GDP of US245 billion (PPP)
• Per capita GDP of US31 845 (PPP)
• International exports 36.3 of GDP
• Free trade between Canada, the United States and
  Mexico

4
A Modern and Diversified Economy
QUEBECS ECONOMY
Distribution of Real GDP by Major Sector in 2007
Natural resources 2.2
Construction 5.8
Manufacturing 18.9
Services 73.1
5
Greater Economic Integration
INTERNATIONALSITUATION

• Freer trade
• Fragmentation of the production process
• Specialization in production
• Offshoring of part of production

• Advances in technology
• Improvements in transportation
• Many agreements and international policies

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Offshoring of Production
INTERNATIONALSITUATION
Hourly Pay of Manufacturing Workers (American
dollars, 2006)

• Offshoring of part of global production to
  emerging economies
• Hourly pay of workers is lower than in advanced
  countries
• In particular, China has gained substantial
  market shares throughout the world

7
Substantial Growth in World Trade
INTERNATIONALSITUATION
Global Exports of Goods and Services (Billions of
American dollars)

• The internationalization of production has
  resulted in substantial growth in international
  trade
• The advanced economies have benefited from cheap
  goods and services and have become more
  specialized in high technology goods

• Germany and the United States are the worlds
  largest exporters

8
Employment in the Manufacturing Sector in Decline
Compared to Services
INTERNATIONALSITUATION
Share of Employment by Sector in the Global
Economy (Percentage of total employment)

• Greater demand for services
• The total number of manufacturing jobs in the
  world is up because of job creation in certain
  emerging countries
• Thanks to productivity gains, global
  manufacturing production continues to rise

9
Quebec Is Under Pressure on a Number of Fronts
ADJUSTMENT IN QUEBEC

• Significant appreciation of the Canadian dollar
  versus the American dollar
• High energy costs
• Economic difficulties in the United States
• Transformation of global trade
• Other challenges facing Quebec

• Productivity
• Demographic changes

10
A Difficult International Situation Oil Price
and a Dollar That Are High and Volatile
ADJUSTMENT IN QUEBEC
Canadian Dollar(American dollars)
Oil Price (West Texas Intermediate, American
dollars )
11
Changes in International Trade Are Having a Major
Impact on Quebec
ADJUSTMENT IN QUEBEC
Chinese Market Shares in the United States
(Percent)
Share of the American Market (Percent)
12
Quebec Is Adjusting to Economic Globalization
ADJUSTMENT IN QUEBEC
Manufacturing Job Losses Between 2002 and
2007 (Thousands)

• Manufacturing job losses in North America

• In Quebec, one out of every five jobs
• In Canada, one out of every eight jobs
• In the United States, one out of every eight jobs

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Job Losses Concentrated in Low Value-Added Sectors
ADJUSTMENT IN QUEBEC
Employment, Wages and Salaries in Quebec
1 According to Statistics Canadas Labour Force
Survey. 2 According to Statistics Canadas
Survey of Employment, Payrolls and Hours.
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Exports Have Peaked
ADJUSTMENT IN QUEBEC
Quebecs Exports of Goods and Services (In
millions of chained 2002 dollars)
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Quebec Continues to Increase Exports in High
Value-Added Sectors
ADJUSTMENT IN QUEBEC
Cumulative Growth in Merchandise Exports from
2002 to 2007 in Quebec (Percent)
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Quebec Must Meet the Productivity Challenge
ADJUSTMENT IN QUEBEC
Productivity In 2006 (Real GDP per hour worked,
dollars)

• Quebecs productivity lags significantly behind
  that of its trading partners
• For Quebec to equal Canadas real GDP per hour,
  it would have to double its growth in hourly
  production each year for 15 years

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Demographic Changes Will Have an Impact on the
Economy
ADJUSTMENT IN QUEBEC
Number of people of working age (age 15 to 64) as
a proportion of the number of people age 65 or
over (Percent)
Projection of the population age 15 to 64 in
Quebec
P
P Statistics Canada
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No Recession Expected Despite a Slowdown in 2008
and 2009
FORECAST ASSUMPTIONS
Real Gross Domestic Product (Percentage change)
2.4
2.0
2.0
1.5
P
P
P 2008-2009 Budget projection
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Contribution of the External Sector
FORECAST ASSUMPTIONS
Contribution of the External Sector (As a
percentage of real GDP)
P
P 2008-2009 Budget projection
20
Domestic Demand Remains Vigorous
FORECAST ASSUMPTIONS
Contribution of Domestic Demand (As a percentage
of real GDP)
P
P 2008-2009 Budget projection
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The Quebec Government Is Taking Action
CONCLUSION

• Balance the budget
• Reduce personal and corporate taxes
• Encourage investment
• Implement an infrastructure plan (30 billion
  over 5 years)
• Tackle the public debt and control spending
• Support the transformation of the economy

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Quebec Continues to Adapt to the International
Situation
CONCLUSION

• Jobs have moved from manufacturing to the service
  sector
• Manufacturing output is shifting to high
  value-added sectors requiring skilled workers
• Companies are investing to boost productivity
• The external sector remains under pressure