Western Provinces to Lead Canadian GDP Growth in 2008, Says CBOC

March 11, 2008
Canadian Economic Press News
Written by: Sean McKibbon

Ottawa – Canada’s economic outlook for the next two years is surprisingly bright despite the gloomy U.S. outlook, according to a new report by the Conference Board of Canada.

While Ontario and Quebec are struggling, the provinces west of Ontario will help offset the weakness at the centre of the country, the board said in its provincial outlook for 2008. Western provinces are all expected to grow their GDPs at a rate above 3% in 2008.

“Yes it’s weak on the external trade sector but if we look at the domestic economy, it’s strong. The job numbers in January and February were excellent and if you combine that with strong wage growth and the fiscal stimulus (announced in the fall by the Federal government), we think the domestic side of the economy in Canada is doing quite well,” said Marie-Christine Bernard, associate director of the Conference Board of Canada’s provincial forecasting service.

The report indicates that Canada’s GDP will grow 2.8% in 2008, but Bernard said a more recent study by the board indicates growth could be as low as 2.5% due to poorer-than-expected growth in the U.S.

“Boosted by ongoing construction projects, robust domestic spending and an optimistic outlook for manufacturing, the Manitoba economy is firing on all cylinders. Its neighbour, Saskatchewan, is also poised for another year of strong growth,” Bernard said.

Manitoba is forecast to see its GDP grow 3.7% in 2008, followed by a more modest 2.9% the following year. Bernard said a diverse manufacturing industry in Manitoba is partly responsible for the surge in growth. Lucrative orders for buses and aircraft parts will help to drive the Manitoba manufacturing sector to an average growth rate of 5.5% over the next two years.

In Saskatchewan, potash and uranium mining and other natural resources and agricultural exports will help to give the province GDP growth of 3.6% in 2008. People moving back to Saskatchewan from Alberta will also give the province a shot in the arm in terms of GDP, but that trend will wane in 2009 and the board predicts GDP will only grow 2.6% in 2009.

The U.S. downturn and resulting dampening of demand for Canadian exports has dragged on the economies of Ontario and Quebec, but Bernard says neither province is expected to slide into recession. Consumers, bolstered by fiscal stimulus measures and real wage gains, are expected to keep the domestic economies of both provinces healthy. Meanwhile, growth in investment by business and public capital expenditures will also help offset trade balance losses and keep both provinces afloat in 2008, the board’s outlook says. Both provinces will see consumption expand 3.1%, the board says.

Ontario is projected to see only 2.1% growth in GDP in 2008 and 2.9% in 2009. In Quebec, the picture is a little brighter in 2008 with GDP growth increasing to 2.4%, but the province will only see an increase of 2.5% in 2009, the board said.

Alberta has seen its economy slow somewhat as natural gas prices have softened and drilling activity has slowed in response. As a result, the conference board projects construction activity in the province will fall 1.9%. Nevertheless, the Alberta economy is expected to grow 3.3% in 2008 and 2009.

British Columbia will take a hit in the forestry sector and manufacturing, but problems in those sectors will be offset by wholesaling and retail trade and construction and mining, the CBOC said. British Columbia’s GDP is expected to grow 3.1% in 2008 and 3% the following year.

In Nova Scotia, new private investment in capital projects and stronger manufacturing prospects should add to a vigorous service sector, producing growth of 2.6% this year, the board said. The province stands to benefit from the development of a $4.5 billion project by Keltic Petrochemical that includes a petrochemical plant, a liquefied natural gas receiving terminal and natural gas-fired cogeneration plants. At the same time, the Deep Panuke offshore natural gas project is expected to break ground in 2008.

Forestry woes in New Brunswick will be offset by strong mining and construction activity for growth of 2.2% in 2008. Following a hiring boom in 2007, Prince Edward Island’s economy will increase by a modest 1.9% this year, but recent tax cuts should support income growth.

In Newfoundland and Labrador, the brisk 7.3% GDP growth seen in 2007 will be followed up by a meager 1.5% in 2008 due to a decline in oil production, which hit its peak in 2007. But Bernard says there is the possibility production increases could come with further investment and development of the Hibernia, Terra Nova, or the Whiterose oil fields.

“It’s a fairly good outlook due to the strength in the domestic economy,” Bernard said.

smckibbon@economicnews.ca

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