Yukon’s economy is expected to grow slightly this year, before shrinking substantially again in 2017, according to the government’s latest economic outlook.
The territory’s GDP will likely grow by 2.8 per cent this year, largely due to mineral production from the Minto mine. Work began on the Minto North open pit last summer.
But that growth will be short-lived, as the Minto mine is scheduled to go into temporary closure next year until copper prices rebound. If that happens, GDP will likely fall by 5.7 per cent in 2017.
Carol MacLellan, director of business and economic research with the Department of Economic Development, said it’s inevitable that Yukon’s economy will feel the impact of individual mining companies’ decisions.
“I think it’s the nature of the beast when you’re talking about a resource economy,” she said. “You’re going to see ups and downs.”
Yukon is the only jurisdiction in Canada whose economy has shrunk for each of the last three years. In 2015, GDP fell by 3.8 per cent, though MacLellan pointed out that Alberta and Newfoundland also saw their economies shrink last year.
“Everyone who depends on commodities and minerals generally was hit in 2015,” she said. “So it’s not just us.”
The Yukon has seen two major mine closures in recent years – Alexco’s Bellekeno mine in September 2013 and Yukon Zinc’s Wolverine mine in January 2015.
On top of that, mineral exploration spending has dropped off significantly since it peaked in 2011. The Department of Energy, Mines and Resources is expecting a further decline to $40 million in 2016, down from $65 million last year. Work at BMC Minerals’ Kudz Ze Kayah site is expected to account for about half that spending.
The value of mineral production is expected to increase to $375 million this year from $250 million in 2015, thanks to production at the Minto mine. But with Minto’s anticipated closure next year, that value is expected to drop to its lowest level since 2008.
Unemployment also jumped to 6.3 per cent last year from 4.3 per cent in 2014, which MacLellan said was related to the faltering mineral sector. Total employment was 19,400 last year, down 400 from 2014. Unemployment is expected to increase to 6.6 per cent this year, before falling back to 6.3 per cent in 2017.
Still, unemployment in the Yukon continues to fall below the national rate of 7.1 per cent.
“We’re still looking pretty compared to the Canadian average,” MacLellan said.
She also pointed out that GDP is only one measure of economic performance, and the mining sector isn’t everything.
“It doesn’t mean that there aren’t positive things going on in the rest of the economy,” she said.
For instance, Yukon’s population is still growing, albeit slowly. Anecdotally, MacLellan said, it seems that more people are staying in the Yukon to retire, as opposed to moving down south.
Anecdotal evidence also suggests that 2015 was a good year for tourism, in part because of the low Canadian dollar. That trend is expected to continue this year.
Retail sales also grew by nearly five per cent last year, which MacLellan described as “dramatic.”
But the report offers no explanation for the sudden increase in retail sales. “That was a bit of an anomaly in 2015, and we’re not entirely sure that will continue,” MacLellan said.
It’s difficult to say when the Yukon will bounce back from its economic slump, she said. Much of it will likely depend on global mineral prices and mining investment in the Yukon.
“There are certainly a number of projects in the pipeline that could come to fruition,” MacLellan said. “But it certainly depends on a number of factors that we can’t control.”
The Canadian economy is expected to grow by 1.5 per cent this year and 1.9 per cent in 2017.
“Recently, Canada’s economy has underperformed the U.S. economy,” the report reads, which is largely due to low oil and mineral prices.
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