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

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%).

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