Don’t expect economic high from cannabis legalization: economist

Investors expecting a windfall once cannabis is legalized might be left waiting to exhale.

“This industry will […] remain rather marginal, with few direct effects on the Canadian economy,” says Desjardins senior economist Benoit P. Durocher in an economics report.

Read: Small caps about more than cannabis in 2018

He’s referring to preliminary results from StatsCan that show the total amount spent by Canadians on cannabis in 2017 was close to $5.7 billion—barely 0.5% of total consumer spending estimated for 2017.

“By comparison, tobacco spending apparently reached $16.5B over the year,” says Durocher. “Clearly, cannabis is expected to be a fairly small component of Canadian consumer spending on the whole.”

Cannabis production in Canada, in contrast to consumption, rivals that of tobacco and liquor, both of which are largely imported.

Read: Canada’s cannabis production rivals alcohol: StatsCan

On the producer side, 89 facilities were authorized to produce medical cannabis in Canada in January 2018, says Durocher. Those that made a foray into the stock market saw their values skyrocket, with the Canadian Marijuana Index jumping 273% between Oct. 31, 2017, and Jan. 9, 2018.

But the high didn’t last.

Though some consolidation has since been observed, says Durocher, the index’s value has dropped about 30% since peaking.

Read the full Desjardins report.