MNI DATA ANALYSIS:Legal Cannabis Unlikely To Impact Canada GDP

By Yali N'Diaye

     OTTAWA (MNI) - The inclusion of the cannabis industry in Canada's economy

will move the value of GDP upward but it is unlikely to change GDP growth rates,

given the small size of the industry, according a Statistics Canada analyst.

     In addition, some of the activity is already indirectly accounted for, such

as power consumption of black market facilities.

     "Due to the relatively small GDP values compared to the overall economy,

its inclusion in the core measure of Canada's GDP is unlikely to impact growth

rates," Ian Donegan, economist at Statistics Canada, told MNI in an email.

     As such, the legalization of cannabis on Oct. 17 is unlikely to affect the

Bank of Canada's overall growth projections in any meaningful way - both in

level and trajectory. The central bank will publish its updated economic

forecasts on Wednesday, when a 25 basis point rate hike of the overnight rate

target to 1.75% is widely anticipated.

     "Cannabis will appear in most components of the accounts including

household spending, taxes, inventories, imports and exports and investment for

the expenditure based GDP, and as compensation of employees, gross operating

surplus and mixed income (for the incomes derived from illegal activities) for

the income based GDP," the analyst said. "In the monthly industry GDP, cannabis

activities will appear in the agricultural and retail industries."

     Statistics Canada estimates the size of the cannabis industry at C$3.0

billion as of the end of 2017, on par with the beer industry and larger than the

tobacco industry. 

     Spending on legal cannabis is expected to range from $816 million to $1.0

billion in the fourth quarter, while purchases of illegal cannabis are

anticipated to range from $254 million to $317 million, about 24% of the total

market.

--MNI Ottawa Bureau; +1 613 869-0916; email: yali.ndiaye@marketnews.com

[TOPICS: MACDS$,M$C$$$]