Natural disasters no big deal for economy: StatsCan

(April 14, 2004) A series of natural disasters had little impact on economic growth last year, Statistics Canada reported today. Canada’s real GDP advanced 1.7% in 2003, about half the pace of the previous year.

StatsCan noted there was much discussion in 2003 on the “seemingly biblical” series of negative shocks to the economy, such as the severe acute respiratory syndrome (SARS) epidemic, mad cow disease, the Ontario blackout, Hurricane Juan in Nova Scotia and the forest fires in B.C.

But the agency said there was no statistical evidence that the disasters were a significant factor in the economic slowdown, although they did affect the quarterly distribution of growth.

“The small effect these events have on the GDP reflect the enormous size of Canada’s economy today,” StatsCan said, noting that a $1 billion loss is not significant in a $1.2 trillion economy.

The biggest impact of these events was on the tourism sector, StatsCan said, although the slide in tourism actually began back in 2001, compounded by the war in Iraq and the rising Canadian loonie.

In fact, the Canadian dollar was the major economic story of 2003, StatsCan believes, posting a 22% increase against the U.S. greenback, the largest 12-month shift in Canada’s history.

Household spending also grew in 2003, but Canadians saved less and borrowed more.

“The savings rate declined from 4.7% to a record low of 2%, freeing up $15 billion,” the agency said. “Meanwhile, consumers borrowed a record $50 billion, $30 billion in mortgages alone.”

Filed by Doug Watt, Advisor.ca, doug.watt@advisor.rogers.com