CIBC World Markets, the capital markets division of one of the leading banks in Canada, published its Economic Insights report on 1/28 that included some perspective on the pending cannabis legalization. ‘Growing Their Own Revenue: The Fiscal Impacts of Cannabis Legalization’ (see pages 7-8 or click here for just this article), authored by Avery Shenfeld, Managing Director and Chief Economist of CIBC World Markets Inc., explores the potential revenue generation for the government based upon sales forecasts ranging from as low as $3 billion to as high as $10 billion. The more aggressive forecast is based upon an extrapolation of the experience in Colorado and applying it to Canada’s larger population.
The CIBC report begins with ‘The Winter of Discontent’, which conveys the firm’s reduced economic outlook. Shenfeld and his team now expect full year economic growth in Canada (as measured by GDP) to be 1.3% compared to their prior forecast of 1.7%. While Shenfeld doesn’t mention it, and Trudeau is motivated by more than just potential tax revenue, the weakness in the Canadian economy is yet another reason to legalize cannabis, which can not only boost tax revenues but also create some economic growth
In October, I posted a presentation I had made on the Canadian market along with slides, sharing a forecast of a combined medical and legal market of $2.3-$5.7 billion by 2019. I believe that extrapolating the Colorado experience is a bit aggressive, as tourism as well as cross-border purchases from residents of nearby (not yet legal for medical or adult-use) states may inflate consumption, as Shenfeld acknowledges. Whether one agrees or not with the CIBC forecasts, it’s very exciting to see on of the “Big 5” in Canada weigh in.