In recent months, oil prices have fallen dramatically and the Canadian dollar has weakened, which has led to speculation that Canada’s economy could be on the verge of an economic crisis. Yet, despite the obvious drawbacks of these developments, they could yield serious economic benefits for Nova Scotia, particularly for firms that export their goods and services to other jurisdictions. On the contrary, however, the cost of imports could rise and harm those consumers who rely on imported goods and services.
Nova Scotia’s economy relies heavily on education, exporting goods and services, and tourism, all three of which could benefit from lower energy prices and a weaker dollar. In fact, these two developments could help the province achieve the recommendations featured in the OneNS report, i.e. doubling the revenue from tourism in the next ten years, expanding the province’s export industry to meet the demand of the global economy, and developing a strategy that would help retain international students in Nova Scotia after they graduate.
Most projections anticipate that the Canadian dollar will remain relatively weakened in the coming months, which could bring enormous benefits to the province’s tourism industry and the estimated 24,000 individuals working in it–one person for every twenty living in communities across the province. In Nova Scotia, 1.9 million tourists traversed the province in 2014 and hotels sold 250,800 rooms, which generated $285 million in economic activity. There are also spillover benefits that help indirectly stimulate the local economy. Essentially, as the Canadian dollar weakens relative to other currencies and exchange rates fall, visiting Canada will become more attractive to foreigners and those who have already planned their vacations will have additional money to spend.
A weaker Canadian dollar might also encourage international students to pursue an education in Canada and postsecondary institutions in Nova Scotia could be among the primary beneficiaries. Furthermore, it would also make housing more affordable for international students who benefit from a lower exchange rate, which could dissuade students from choosing schools in Europe or the United States. Lastly, an influx of international students would increase the demand for local goods and services, resulting in additional economic activity and generating more revenue for local and provincial governments.
In his keynote speech at the Institute’s “For the Love of Nova Scotia, Let’s Focus on the Economy” event on February 11th in Halifax, Oxford Frozen Foods President John Bragg argued that Nova Scotia’s export industry should expand to the global market. Fortunately, these exporters will benefit from lower energy costs and a weaker currency and the time is ripe for those firms to expand their marketing efforts to countries in Asia and Europe wherein demand for the goods and services that Canadian firms offer is high. In fact, Clearwater Seafood Incorporated reported $444.7 million in earnings in the 2014 fiscal year and international sales have been rising in recent months. As Roger Taylor put it in the Chronicle Herald, “Product has a lot to do with it, but Clearwater is proving that being based in Nova Scotia is no impediment to successfully doing business around the world.”
To clarify, falling oil prices and a weakening currency has some clearly negative effects, particularly for Canadian firms in the western region. In Nova Scotia, however, those two developments could bring tremendous economic benefits to the province by encouraging tourism in the region, enticing international students into attending one of Nova Scotia’s premier postsecondary institutions, and making Canadian exports more affordable to international consumers.
Rinzin Ngodup is an AIMS on Campus Student Fellow who is pursuing a graduate degree in economics at Dalhousie University. The views expressed are the opinion of the author and not necessarily that of the Atlantic Institute for Market Studies