News
November 25, 2011
Conference Board Study Says Provincial Economies Set To Grow, West Will Lead

OTTAWA - The Conference Board of Canada has released an optimistic economic forecast that predicts the Western provinces will power the country to growth over the next couple of years, thanks to expected strong activity in the resource sector.

In one of the rosiest outlooks of the major forecasting houses, the Ottawa-based think-tank said Friday that Canada's economy will expand to 2.4 per cent growth in 2012, and 3.3 in 2013.

The projections were about half-a-point better than the Bank of Canada's and a full point higher than other observers, but came with a caution that severe government debt problems in Europe remain a real threat to all economies.

"Private sector activity will pick up in 2012, helping to offset sharp declines in federal and provincial infrastructure spending," associate director Marie-Christine Bernard said.

"But despite little direct exposure to European markets, provincial economies would be affected if the EU sovereign debt crisis spread globally. As a result, risks to the forecast remain elevated."

The board said it sees strength in businesses flush with cash and ready to re-engage and strong global commodity prices, which will drive investment and production in the resource sector, particularly in the West.

That will help offset a sharp drop in federal and provincial infrastructure spending that had been ramped up during the recession to stimulate the economy.

The think-tank predicted oil-rich Alberta will lead the recovery with a 3.6 per cent growth rate next year, followed close behind by Saskatchewan with a 2.8 per cent gain coming off an "impressive" 5.1 per cent jump in economic activity this year.

The report said British Columbia's economy will grow at a more moderate pace of 2.6 per cent this year and 2.5 per cent in 2012, while Manitoba's GDP growth of 2.1 per cent in 2011 will be followed by a 2.6 per cent expansion in 2012, thanks to continued demand for buses and aerospace products.

The softness in the economy remains in central Canada and the Atlantic, as government spending restraint, among other factors, begin weighing on provincial performance.

The Conference Board said spending by Ottawa and other levels of governments will fall by almost one per cent next year, taking about $3 billion out of the economy nationally.

Ontario is expected to record a 2.2 per cent growth rate next year, while Quebec will be somewhat weaker at 1.8 per cent.

It also believes that unemployment will continue to fall next year, going from this year's 7.4 per cent average to 6.8 per cent in 2012 and 6.4 per cent in 2013. In raw numbers, the think-tank expects the economy to create 350,000 new jobs in each of the next two years.

But it cautions it is assuming Europe will be able to resolve its sovereign-debt crisis without too much turmoil — an assumption even it admits might be "brave."

"We make the (perhaps) brave assumption that the European Union, European Central Bank, and the IMF (International Monetary Fund) will be successful in propping up heavily indebted countries (and, if needed, European banks) and thereby mitigate negative impacts on global financial markets," it states up front in it's autumn outlook.

"Under such assumptions, the outlook for North America is for a steady but protracted recovery."

URL: http://ca.finance.yahoo.com/news/conference-board-study-says-provincial-141332454.html




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