Canada's economy is expected to grow by 1.5 per cent in 2016, with British Columbia to lead the country in growth, according to an outlook by the Conference Board of Canada.
Four provinces will have a GDP growth rate of more than two per cent — B.C., Ontario, Manitoba and Prince Edward Island, the think-tank predicts.
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The Conference Board paints a picture of two-speed Canadian economy, with resource-dependent provinces in recession or barely growing, while most of the rest of the country strengthens as manufacturing exports grow.
British Columbia is expected to be the fastest-growing province for the next two years — with its economy expanding by 3 per cent in both 2016 and 2017. While the mining sector is weak, strength in forestry, construction, transportation, and the real estate industry will power its growth, the outlook predicts.
Ontario's GDP is forecast to rise by 2.8 per cent in 2016 and by 2.6 per cent in 2017, primarily because of export growth in the automotive sector. The low dollar and Toronto's rising housing market are combining to reset economic conditions in the province.
Manitoba will grow by 2.1 per cent in 2016 and 2.6 per cent in 2017 as its agricultural sector and services continue to grow.
In Prince Edward Island, there has been growth in housing and in manufacturing that will result in 2.3 per cent growth in 2016 and 1.7 per cent 2017.
Recession in Alberta, N.B.
The optimism in these four provinces is offset by a two per cent contraction in Alberta, where disappointing oil prices and the impact of the Fort McMurray fires will continue the recession that began last year.
Alberta's economy is expected to recover in 2017, partly as a result of the rebuilding of Fort McMurray.
New Brunswick's economy will shrink by 0.4 per cent in 2016 because of weakening manufacturing, construction, and mining plus lacklustre growth in the services sector.
Saskatchewan and Newfoundland and Labrador also have stagnant economies. In N.L, Hebron and Muskrat Falls are scheduled to be completed in the next couple of years, worsening the outlook for 2017.
Saskatchewan has seen growth in agricultural sector, but mining has been hit hard by low commodity prices. It could growth by just 0.2 per cent this year and 1.1 per cent next year..
Headwinds for Canadian economy
For the country as a whole real GDP advanced 0.9 per cent in 2015, about half the pace recorded in 2014, so a projection of 1.5 per cent for 2016 is an improvement.
The Conference Board predicts the Canadian economy will be still stronger in 2017, when infrastructure spending proposed by the federal government has an impact.
Nonetheless, there are plenty of headwinds for Canada's economic growth prospects:
- Investment in the oil and gas sector is still falling.
- Non-energy investment is lacklustre, so Canada may soon face lack of capacity in manufacturing.
- Canadian consumer spending may not improve because incomes aren't rising sufficiently.
- Consumers are also stretched thin with debt.
- Growth prospects for the global economy remain poor.
- U.S. growth this year is also tepid.
GDP growth by province: Conference Board predictions