December 31, 2012
Western Canada will lead nation in economic growth
The western provinces, in particular Alberta and Saskatchewan, will lead Canada in growth next year, while a sluggish global economic climate will generate lackluster performance in the rest of the country.
“We continue to expect Western Canada to benefit the most from strong activity related to natural resources and grow at rates exceeding the national average in both 2012 and 2013,” said RBC economists Paul Ferley, Robert Hogue and Laura Cooper in a recent provincial outlook. “The Prairie provinces will also enjoy healthier conditions in their agricultural sectors. In provinces east of Manitoba, we expect growth to be slower than the national average. For the most part, these provinces lack a powerful catalyst for growth.”
In the run up to the New Year, several economic forecasts were released that estimated real Gross Domestic Product in Canada in 2012 grew by 2 per cent (RBC Economics), 1.9 per cent (TD Economics) and 1.8 per cent (Conference Board of Canada). In 2011, real GDP in Canada grew by 2.6 per cent.
All of these reports said the slowdown in economic activity was not isolated to one industry and is being driven by global economic problems, such as the European Union’s sovereign debt, as well as fiscal restraint and weakness in the mining, oil and gas sectors.
Despite these problems, the outlook for 2013 and 2014 is a bit more positive. RBC Economics and the Conference Board of Canada predict real growth in GDP of 2.4 per cent and 2.3 per cent respectively in 2013, while TD Economics expects continued slow growth of 1.7 per cent.
The forecast in 2014 is a little better with the RBC Economics, the Conference Board of Canada and TD Economics estimating slow growth of 2.8 per cent, 2.6 per cent and 2.5 per cent respectively.
Western Canadian provinces have been able to withstand fiscal and economic troubles in the global economic environment.
The Alberta economy is expected to be among the faster growing provincial economies in 2012, with RBC Economics, the Conference Board of Canada and TD Economics predicting growth in real GDP of 3.8 per cent, 3.4 per cent and 3.1 per cent respectively.
Both RBC and the Conference Board of Canada expect oilsands producers to remain cautious in 2013, but investment will remain elevated, which will provide sustained growth in the construction industry.
However, RBC and TD argue growth will be slow or put in a holding pattern until pipeline capacity can be increased and crude oil prices normalize.
For this reason, real GDP will slow down in 2013 to 3.5 per cent (RBC), 3 per cent (Conference Board of Canada) and 2.5 per cent (TD). But, GDP will break out of this holding pattern in 2014 and grow by 4.2 per cent (RBC), 3.3 per cent Conference Board of Canada and 3.2 per cent TD.
Growth in Saskatchewan in 2012 was slowed down by the cancellation or delay of potash-related investments, as well as cutbacks in potash production due to rising inventories.
As a result, real GDP is estimated to be 3.1 per cent (TD), 3 per cent (Conference Board of Canada) and 2.8 per cent (RBC) in 2012.
A rebound in mining output and continued strength in construction are expected to result in real GDP growth of 3.5 per cent (RBC), 3 per cent (Conference Board of Canada) and 2.5 per cent (TD) in 2013. The underlying sources of strength next year, which include wheat, canola, potash and oil, are expected to continue in 2014 contributing to GDP growth of t 3.7 per cent (RBC), 3.5 per cent (Conference Board of Canada) and 3.1 per cent (TD).
The Manitoba economy is expected to grow by 2.5 per cent (Conference Board of Canada), 2.9 per cent (RBC) and 2.2 per cent (TD) in 2011.
As the US recovery gains manufacturing will gain strength as the demand for bus and aerospace equipment grows. Increasing manufacturing activity is a key factor that will allow overall real GDP growth to remain solid in 2013, easily offsetting the expected slowing in agriculture.
RBC predicts solid gains in the mining and oil and gas sector with increases close to 4 per cent during 2013 and 2014. Construction activity is expected to increase by 6 per cent by 2014.
As a result real GDP in Manitoba is forecast to increase by 3 per cent (RBC), 2.1 per cent (Conference Board of Canada) and 1.6 per cent (TD) in 2013.
In 2014, economic growth should improve with real GDP growth of 3 per cent (RBC), 2.3 per cent (Conference Board of Canada) and 2 per cent (TD).
The British Columbia economy experienced slow growth this year due to depressed natural gas prices, a cooling off of the residential housing market and global uncertainty.
Real GDP in 2012 is expected to be 2.1 per cent (RBC), 2 per cent TD and 1.8 per cent (Conference Board of Canada).
According to RBI, non-residential investment will be the main driver of economic growth in BC in 2013 and beyond.
There are several major resource projects, including in mining, smelting and electric power, as well as and transportation. The federal government’s $8 billion, eight-year order for seven non-combat ships will generate substantial activity in the province.
As a result, economic growth in 2013 is predicted to be 2.7 per cent (RBC), 2.3 per cent (Conference Board of Canada) and 1.7 per cent (TD).
Economic activity is expected to pick up in 2014, with real GDP of 2.6 per cent (Conference Board of Canada and RBC) and 2.5 per cent (TD).
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