Canada's GERD slips as economic growth outstrips R&D performance

Guest Contributor
January 21, 2008

Canada's surging economy is growing even faster than overall R&D spending, pushing the GERD-to-GDP ratio back to 1.94 in 2006 — the lowest level in six years. The latest data from Statistics Canada show that despite the declining GERD, Canada now ranks 11th among OECD nations with R&D expenditures of $28.1 billion while projections for 2007 show a 3.3% increase to $29 billion.

The national R&D output in 2006 was up 1.4% from the previous year, while the GDP increased an impressive 5.2% to nearly $1.5 trillion.

The recent surge in R&D expenditures is due to increases in all funding sources, particularly the higher education sector which moved up 4.6% to $4.8 billion. Increases in other funding sectors include private non-profit organizations ($849 million/+4.3%), business enterprises ($13.8 billion/+3.8%), provincial governments ($1.4 billion/+3.8%), federal government ($5.4 billion/+3.2%) and foreign sources ($2.6 billion/+2.7%).

Funding levels from all sources except foreign sources represent all-time highs. Foreign funding of Canadian R&D hit a peak of $3.6 billion at the height of the tech boom in 2000.

On the performance side, the business sector is by far the largest R&D spender with a projected $15.8 billion in outlays for 2007. That accounts for 52.6% of all R&D performed in Canada, a substantially smaller share than it enjoyed in1998 when it accounted for 60.2% of all spending.

From a geographical perspective, the eastern and western provinces demonstrate the fastest pace of growth for R&D performance, while Ontario's growth is slowing and Quebec's is at a virtual standstill.

In 2005 (the latest year for which a provincial breakdown is available), the pace was led by Newfoundland and Prince Edward Island with annual increases of 54.3% and 53.7% respectively. Although the provinces are building on a small base, the numbers are nonetheless impressive — $267 million for Newfoundland and $63 million for PEI.

Newfoundland's sharp increase was propelled by huge increases in private sector spending and performance, primarily in oil and gas. Funding of business R&D jumped 172.2% to $98 million — the highest level of private sector R&D funding in Atlantic Canada. Business R&D performance in Newfoundland was $86 million, up 196.6% from 2004.

In Western Canada, Manitoba led the four provinces with a 12.3% increase in overrall R&D to $577 million. Saskatchewan increased its R&D by 6.4% to $450 million, while Alberta's was up 6.2% to $2.3 billion. British Columbia secured the largest amount in Western Canada with $2.5 billion, up 5.3% from 2004.

Business spending in Western Canada increased the most in Saskatchewan, up 26.2% to $154 million, followed by Manitoba, which secured $197 million for an increase of 10.7%. Business R&D was up 6.2% in Alberta to $1.1 billion and up 1.5% in British Columbia to $965 million.

R&D performance in Ontario was up a respectable 5.2% to $12.5 billion or 52.3% of the national total. Business accounted for $8.0 billion (up $313 million from 2004) or 64.5% of Ontario's R&D performance. In Quebec, overall R&D performed inched up just 0.3% to $7.2 billion for 27.2% of the Canadian total. Business R&D was $4.2 billion (down $118 million from 2004) for 58.2% of total R&D performance.

The largest increases in federal R&D funding occurred in PEI, which more than doubled to $37 million. Newfoundland's share of federal funding increased 33.3% to $80 million, followed by Saskatchewan ($400 million/+22.7%), the National Capital Region ($1.1 billion/+16.7%), Ontario ($1.5 billion/+13.2%) and Quebec ($1.2 billion/+9.4%).

R$

GERD/GDP

($ millions)
      GERD/   
YearGERD   GDP   GDP   
199010,260   679,921   1.51   
199110,770   685,367   1.57   
199211,338   700,480   1.62   
199312,184   727,184   1.68   
199413,341   770,873   1.73   
199513,754   810,426   1.70   
1996r13,817   836,864   1.65   
199714,635   882,733   1.66   
199816,088   914,973   1.76   
199917,638   982,441   1.80   
200020,581   1,076,577   1.91   
200123,132   1,108,048   2.09   
200223,532   1,152,905   2.04   
200324,635   1,213,408   2.03   
200426,480   1,290,788   2.05   
200527,699   1,371,425   2.01   
200628,067   1,446,307   1.94   
200728,894   ...   ...   

GERD by performing sector and funding sectors

($ millions)
YearFederal   Provincial   Business   Higher Ed   Non-profit   Foreign   Total   
Performing Sector
19961,792   242   7,997   3,697   89   ...   13,817   
19971,720   214   8,739   3,879   82   ...   14,634   
19981,743   216   9,682   4,370   77   ...   16,088   
19991,859   233   10,400   5,082   63   ...   17,637   
20002,080   255   12,395   5,793   57   ...   20,580   
20012,103   276   14,266   6,424   63   ...   23,132   
20022,190   282   13,541   7,455   63   ...   23,532   
20032,083   278   14,039   8,143   92   ...   24,635   
20042,083   290   14,947   9,058   103   ...   26,480   
20052,414   300   15,356   9,518   112   ...   27,669   
20062,209   318   14,360   9,974   116   ...   28,067   
20072,338   324   15,773   10,433   116   ...   28,894   
Funding Sector   
19962,815   629   6,296   1,905   358   1,714   13,817   
19972,813   658   7,031   1,971   367   1,794   14,634   
19982,830   640   7,355   2,339   372   2,552   16,088   
19993,216   770   7,917   2,649   380   2,705   17,637   
20003,560   879   9,224   2,892   445   3,580   20,580   
20014,096   1,043   11,618   2,928   536   2,911   23,132   
20024,250   1,172   12,098   3,462   628   1,921   23,532   
20034,524   1,398   12,371   3,589   637   2,136   24,635   
20044,648   1,392   13,082   4,147   735   2,476   26,480   
20055,243   1,367   13,431   43408   777   2,541   27,669   
20065,265   1,428   13,463   4,549   814   2,548   28,067   
20075,437   1,482   13,840   4,758   849   2,618   28,984   
Source: Statistics Canada



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