Most economists say the Canadian economy will manage to avoid a recession this year, but a growing number say Ontario may not be so lucky.

The University of Toronto's Institute for Policy Analysis is the latest to join the recession camp. Its new forecast for the Ontario economy is calling for negative growth in the first six months of the year — what it calls a "very mild" recession.

Its forecast says the Ontario economy shrank by 0.4 per cent in the first quarter and will shrink by another 0.1 per cent in the second quarter. The third quarter will show no growth, while Q4 is expected to record tepid growth of 0.3 per cent.

The Institute cites the fallout from a worsening U.S. economy, a big drop in Ontarians' savings rate and dismal trade figures in the first quarter. It forecasts that motor vehicle exports from Ontario in the first three months of the year will fall by 10 per cent from the previous quarter.

The forecast's authors — Peter Dungan and Steve Murphy — say overall growth in Ontario will be just 0.1 per cent in 2008, before rebounding somewhat to 2.2 per cent growth in 2009 and 3.2 per cent in 2010.

'Very mild' recession

"As recessions, go this one should be very mild," the authors say. "The central banks in both the U.S. and Canada have clearly indicated a willingness to provide accommodative monetary conditions."

But they say they're worried that the U.S. slowdown will be even worse than expected.

Export Development Canada came out with an export forecast Wednesday that said Ontario exports would drop by seven per cent in 2008. "Ontario's exports will be battered this year by the high Canadian dollar and eroding U.S. sales," said EDC deputy chief economist Peter Hall.

Several big bank forecasts have warned that the Ontario economy will be on the brink of recession in 2008. TD Bank Financial Group chief economist Don Drummond said there will be at least one negative quarter of growth in Ontario and "quite possibly" two consecutive negative quarters — the technical definition of recession.

Desjardins Group said last month that Ontario's economy was heading for two straight quarters of negative growth.

"Its economy is at the mercy of the manufacturing industry, especially the automotive sector, which is going through a period of major restructuring," said Desjardins Group deputy chief economist Yves St-Maurice.

Last week, Ontario finance minister Dwight Duncan acknowledged that the provincial economy was "going sideways" — a stagnation that would continue "until well into 2009." The provincial economy grew by just 0.1 per cent in the last quarter of 2007.