Canada's economy will vary widely between provinces, and Saskatchewan is likely to lead the way in 2010, a CIBC report suggests.

"What is Canada, if not a collection of 10 increasingly varied provinces," CIBC economist Warren Lovely wrote in a research report Thursday.

As provinces pick themselves up after a devastating recession, the march back to economic health will be at different speeds, Lovely wrote.

"Regional divergence will remain a telling story in the years ahead," he said.

In general, Western provinces stand to benefit from their relative proximity to the booming Asian economy and strong prices for commodities. British Columbia will be among the leaders because of increased activity in the mining and shale gas sectors and an attractive royalty regime.

Commodities drive growth

Expansion of the oilsands in Alberta will be somewhat offset by uncertainties in natural gas and by a consumer confidence that is only tentative.

Saskatchewan is poised to lead the country, the bank forecasts.

The bank estimates Saskatchewan's economic output will grow three per cent in 2010 and 4.1 per cent in 2011. That's better than the bank's projection of 2.3 and three per cent, respectively, for the country as a whole.

The bank cites demand for potash, agriculture and uranium as reasons for the bullish stance on Saskatchewan.

Manitoba will likely expand at the same rate as the national average, since it withstood the recession relatively unscathed. "A diverse manufacturing base is a strength," Lovely said.

Indeed, when it comes to economic growth, the “haves” and “have-nots” can be defined by natural resource wealth, the bank said in the report.

The news is not all bad for less resource-heavy provinces. Inventory restocking after a winding down during the recession will see Ontario beat the national average for the first time since the Canadian dollar began appreciating, the bank forecasts.

'A diverse manufacturing base is a strength.'— Warren Lovely, CIBC economist

The bank also lauds the Ontario and B.C. governments, saying their plans for a harmonized sales tax and corporate tax cuts will boost competitiveness and help lure jobs.

Quebec has held up better than its neighbour, Ontario, but "forestry remains an industry in decline, aluminum is challenged by new global capacity, and refining output has been scaled back," the bank noted. "Aerospace demand has also softened."

The Atlantic provinces are set to perform slightly under the national average, the bank said, although personal finances are in relatively good shape throughout the region.

"Barring disruptions, growth in 2011 should strengthen further, with large energy projects having the potential to deliver strong growth longer-term," the bank said.