How does the forest sector contribute to Canada’s economy?

In 2023, the forest sector contributed $27.0 billion (0.9%) to Canada’s nominal GDP, representing a 22% reduction compared to 2022. Real GDP for the forest sector also contracted 8% year-over-year.

For comparison, nominal GDP for Canada’s total economy shrank by 0.5% in 2023, yet real GDP rose by 1.3%.

• Prices for some key forest products were significantly lower in 2023, such as softwood lumber and oriented strand board. The lower prices contributed to the outsized drop in the forest sector’s nominal GDP compared to the real GDP.
• In the wood product manufacturing subsector, real GDP shrank 7%, in part due to lumber production curtailments and sawmill closures, most notably in British Columbia.
• Real GDP in the pulp and paper manufacturing subsector decreased 10% from the previous year. Several pulp facilities curtailed production or closed operations during the year as the structural decline in demand for some paper products continued, with increasing global digitalization.
• Real GDP in the forestry and logging subsector fell 7%, driven by ongoing wood supply constraints in British Columbia and the record-setting wildland fire season in 2023.

Why is this indicator important?

• Contribution to nominal GDP is one of the primary indicators used to gauge the size and health of Canada’s forest sector compared to other sectors each year.
• Real GDP measures the year-over-year change in the size of the forest sector’s economy, after accounting for inflation.

What is the outlook?

• Growth in the wood products subsector is highly linked to housing starts and construction projects. Spending in these segments has been negatively affected by higher mortgage and interest rates. In the long term, the prospects for this subsector are positive and will be supported by strong underlying demand in both the Canadian and United States housing markets.
• Demand for traditional paper products, such as newsprint and printing and writing paper, is expected to continue to decline. Demand for packaging products is expected to grow to keep pace with the demand for online shopping and e-commerce deliveries.

How government initiatives support sustainable forest management

• The federal government’s commitment to address housing affordability and increase the construction of new housing, as part of the Canada’s National Housing Strategy, is expected to support growth for the wood products sector.

Graph 1: Comparison of the forest sector nominal gross domestic product by subsector for each year between 2013 and 2023

Graph 2: Comparison of the proportion of real gross domestic product growth for all sectors and for the forest sector between 2013 and 2023

Between 2022 and 2023, Canadian production of nearly all forest products decreased. Softwood lumber production decreased by 5.9% and production of structural panels decreased by 5%. Printing and writing paper production decreased by 22.9%. Wood pulp and newsprint decreased by 7.5% and 4% respectively.

• Demand for lumber and structural wood panels continued to decrease in 2023 due to increases in interest rates, which reduced construction activity and housing affordability. This was also the case in the United States, Canada’s largest market for softwood lumber.
• Fibre shortages from wildland fire impacts, mountain pine beetle infestations and other factors creating downtime at production facilities contributed to declines in wood product and pulp production.
• Newsprint as well as printing and writing paper production continued its long-term downward trend, reflecting the increasing digitization of media and workflows.

Why is this indicator important?

• Canada is one of the world’s top manufacturers and exporters of forest products.
• Production is one of the first forest sector indicators to be affected by economic and market challenges.

What is the outlook?

• A limited supply of Canadian logs due to rising log costs and a declining supply of fibre is expected to continue in 2024, dampening the production of wood products and pulp. Downtime in production has a trickle-down effect on pulp and paper production due to reducing the quantity of wood chips, which are a key input.
• Over the medium term, a focus on expanding the housing supply in Canada and the United States should encourage the construction activity, in turn supporting long-term demand for wood products.

How government initiatives support sustainable forest management

• The federal government’s Forest Innovation Program enables the growth of Canada’s bioeconomy by delivering R&D and technology transfer funding to the forest sector. The aim of this program is to improve the sustainability and economic productivity of Canada’s forest sector.

Production of Canadian forest products, 2013–2023

Graph 1

Graph 2

In 2023, the value of Canada’s total forest products exports decreased 21% year-over-year to $36.2 billion because of weak forest product prices and subsequent reduced production.

• By value, softwood lumber exports demonstrated the greatest contraction (down $5.2 billion or 38% compared to 2022), resulting from significantly lower average lumber prices and resulting production curtailments in British Columbia and Québec. The value of structural wood panel exports also dropped 33% from the previous year.
• High interest and mortgages rates slowed new housing construction in the United States, lowering demand for Canadian lumber and panels. Furthermore, the continued application of United States import duties on Canadian softwood lumber products made exports of softwood lumber less competitive in the United States market compared to those from other jurisdictions.
• In 2023, wood pulp exports decreased by 16%, printing and writing paper exports fell 13%, and newsprint exports declined 7% (by value). Weak global economic growth from high levels of inflation and elevated interest rates, led to lower demand and weaker prices.

Why is this indicator important?

• As one of the world’s largest forest product exporters, Canada is a key supplier to countries around the world.
• Canada has an abundant and renewable supply of wood sourced from sustainably managed forests. By exporting forest products, the Canadian forest sector meets the needs of global consumers, which could include helping them toward their climate change mitigation goals, while making a substantial contribution to Canada’s economy and balance of trade.

What is the outlook?

• Demand for softwood lumber and structural wood panels used in home construction has been negatively impacted by rising interest rates. The pace of recovery for Canada’s forest product exports will depend on the pace of the housing sector expansion in the United States and Canada.
• Over the medium term, a focus on expanding housing supply in Canada and the United States should help the recovery of the consumption of related wood construction products. Going forward, strong underlying demand in the United States residential construction, which is the main export destination for Canadian panels and softwood lumber, should help to support export growth in these products.
• The consumption, and thus exports, of paper products (e.g. newsprint) are expected to continue to trend downward over the long term, while others are expected to remain flat, such as tissue paper.

How government initiatives support sustainable forest management

• To counter the weaker long-term growth prospects, Canada is seeking to diversify its forest product offerings by adding value through more secondary wood manufacturing and investing in innovative, low-carbon projects.