Western Provinces Predicted to Lead Growth in CanadaMonday, January 17, 2011 > 10:01:34
(Daily Commercial News – Richard Gilbert)
Several new economic forecasts for 2011 predict that the Western provinces will lead Canada in growth, as the recovery in the rest of the country slows down.
“The slower national momentum over the spring and summer is expected to persist into 2011, reflecting a number of factors, including a winding down of inventory restocking, a cooling off in housing activity and a more cautious consumer,” said Alex Koustas, an economist with Scotia Economics. “Meanwhile, resource-related activity is ramping up alongside strong emerging market demand for key industrial products, which along with a weaker U.S. dollar, is boosting commodity prices.”
As the new year approached, Scotia Economics, RBC Economics and the Conference Board of Canada (CB) estimated real GDP expanded by 3% (CB and Scotia) or 3.1% (RBC) in 2010. All of these reports said the pace of the recovery last year was slower than previous upturns.
For this reason, economic growth is expected to slow down to 2.5% (CB) or 2.3% (Scotia) in 2011. RBC predicts economic growth will remain virtually unchanged at 3.2% in 2011.
The shifting growth dynamics in Canada will favour the resource-rich regions in the east, west and north of the country. Given this general trend, all three forecasts predict Alberta, Saskatchewan and Manitoba will show solid growth in 2011.
“Provincial economies, which are more closely tied to certain natural resources such as potash, crude oil and metals, are projected to grow at the fastest rates, as strong global demand for commodities translate into higher commodity output, commodity prices and investment in productive capacity,” said Marie-Christine Bernard, associate director of provincial economic trends with the conference board. “Western provinces such as Saskatchewan and Alberta will be the prime beneficiaries, but so will Newfoundland and Labrador at the other end of the country.”
This year, Saskatchewan is expected to be Canada’s top economic performer with a growth of 4.5% (RBC), 4.4% (CB) and 3.3% (Scotia). There are several expansion projects underway in the potash industry and the conference board predicts the construction industry will grow by five per cent in 2011. Energy and agriculture are also expected to be major drivers of growth in Saskatchewan.
The Alberta economy is expected to experience strong growth of 4.3% (RBC), 3.0% (Scotia) and 2.8% (CB). This is seen as the start of another prolonged cycle of economic growth. RBC agreed that the Alberta economy will expand this year, driven by strong growth in the energy sector. “With interest in developing Alberta’s oilsands growing ever higher, we expect the gush of capital spending on mega-projects to continue next year and beyond,” said RBC senior economist Robert Hogue. “This development will pump tremendous activity into the provincial economy, thereby acting as a catalyst for both faster job growth and stronger migration from outside the province.” There are several new in-situ oilsands projects that will start construction over the next five years, as are projects involving the construction and expansion of oil pipelines.
According to RBC economics and the conference board, Alberta will lead the country in employment growth over the next two years. The conference board predicts 60,000 new jobs will be created in 2011, while RBC report estimates employment will increase by 37,000 jobs. New job opportunities should attract migrants and boost population growth. However, this growth will not immediately generate more housing starts because a significant excess in capacity was created during the recession.
The British Columbia economy is expected to go from being one of the fastest growing provinces in the country to a slower economic recovery of 2.9% (RBC), 2.8% (Scotia) and 2% (CB) in 2011. The slower pace of growth will be pushed by the production of coal and copper, which are expected to increase by 8-10%.