New economic data from Statistics Canada shows the Northwest Territories’ economy is “stagnating,” according to a Yellowknife economist.

And Graeme Clinton, owner of research firm Impact Economics, says that’s not a big surprise, as the territory’s diamond mines are past peak production and preparing to close.

“There’s not a lot of activity behind them, so we can expect significant growth in the future,” Clinton said.

A report released last week by the Northwest Territories Bureau of Statistics, based on Statistics Canada data, indicates the territory’s gross domestic product (GDP) fell by 0.4 per cent between 2022 and 2023. Newfoundland and Labrador was the only other jurisdiction in Canada to also see a decline. of GDP over this period.

GDP represents the aggregate value of all goods and services produced in the economy in a specific year and is a way to measure economic growth.

Acting Territorial Statistician Jeff Barichello says last year’s decline in GDP is due to the Territory’s reliance on “goods-producing industries” – namely mining, oil and gas – which fluctuate.

Barichello adds that while service sectors – including healthcare, finance and public administration – have returned to pre-pandemic levels, goods-producing industries remain affected.

The economy “insulated” by federal transfers

Clinton explains that the territory typically receives a significant portion of its annual revenue in the form of federal transfer payments, including about $1.77 billion this year.

These payments, which increase slightly each year, mainly finance public administration, education and health care – key sectors of service production.

“The total amount of federal dollars represents almost half of our territory’s total gross output…which means that half of our economy is sheltered from the ebbs and flows of the market economy,” he said. Clinton said.

“There’s not a lot of activity behind them,” said Graeme Clinton, owner of research firm Impact Economics, referring to mines expected to be closed in coming years. (Submitted by Graeme Clinton)

Despite the decline of the mining and oil sectors, Clinton says the territory’s economy remains relatively stable thanks to this continued federal support, which is “largely funded by Canadian taxpayers.”

Clinton says the territory’s economy outside of the public sector is neither large enough nor growing.

Clinton says as the Diavik diamond mine, scheduled to close in 2026, and the Gahcho Kué mine, scheduled to close around 2030, wind down, the economic landscape in the Northwest Territories will change again.

These closures are expected to have both direct and indirect effects on the economy, since the mines employ more than 1,400 people in the territory.

“We’re already seeing some of that now. By next year, when we have the numbers for 2024, we might start to see a slowdown in mining,” Clinton said.

Data shows diamond mining activity in the Northwest Territories decreased slightly, by 2.1 per cent, between 2022 and 2023.

Clinton says that as mines close over the next three to eight years and nothing replaces them, “we can expect a much smaller economy than today.”

Increase in tourism-related income

Other sectors experienced a surge between 2022 and 2023, notably accommodation and catering. These were among the hardest hit by the pandemic and saw an increase of 12.5% ​​between 2022 and last year.

Clinton attributes this growth not only to increased tourism, but also to “job tourism.”

“Many people come to the Northwest Territories to participate in our economy by creating jobs, such as the Giant Mine remediation project,” Clinton said.

He adds that these workers contribute to the growth of the territory’s accommodation, catering and leisure sectors, among others.