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Legalization Will Mean A Boost To Canada's GDP - But How Big Of A Boost?

Statistics Canada will begin considering the new cannabis market in their economic calculations once the substance becomes legal in a few weeks.

According to Toronto-Dominion Bank (TD), the legalization of cannabis adds somewhere around C$8 billion (US$6.2 billion) to the country's economy. This will inevitably lead to an increase in Canada's GDP as reported by Statistics Canada.

However, TD warns that it may not be as high as initial reports suggest. 

TD has raised their previous growth forecast for the last quarter of 2019 from 2 percent up to 2.9 percent. Overall, the 2019 annual forecast has been raised from 2 percent to 2.2 percent.

These numbers are somewhat misleading. The cannabis economy already exists to a large extent in Canada, and has been steadily contributing to the country's GDP over the past few years. Come October 17th these contributions will be officially recorded for the first time, but it will not immediately account for the industry's previous contributions.

As TD says, these growth numbers will begin to level out once historical data becomes available and can be retroactively applied to the firm's calculations.

So, while the legalization of cannabis will certainly have a positive impact on Canada's GDP, it will still be some time until we have an accurate understanding of just how much the new industry is contributing.

h/t Bloomberg


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