Provincial economies battered by global recession

Saskatchewan, Manitoba, Prince Edward Island and New Brunswick are the only four Canadian provinces forecast to have growing economies this year, according to the Conference Board’s Provincial Outlook-Winter 2009.

“No province is immune to the effects of the global recession, but the momentum in the domestic economies of Saskatchewan and Manitoba will cushion the blow from the downturn in the resource sector,” says Pedro Antunes, director, national and provincial forecast. “The outlook for the second half of the year is more optimistic. All provinces are expected to bounce back in 2010, as the U.S. economy hits bottom and begins to recover.”

Saskatchewan will again post the strongest growth among the provinces at 1.6 per cent. In the short-term, the province’s mining sector will feel the collapse in commodity prices, but strong potash prices and infrastructure spending will bolster construction activity. Labour markets will expand and provincial income tax cuts will keep retail sales growing at a healthy pace this year.

Manitoba is also in a good position to ride out the global recession. Large public and private capital projects, a resilient labour market and personal income tax cuts will lift Manitoba’s economic growth by 1 per cent in 2009.

Prince Edward Island’s real GDP is expected to grow by 0.6 per cent in 2009 – and stronger growth is forecast next year, as the province gears up for the massive development of wind power energy on the Island.

A significant provincial fiscal stimulus package – $100 million in tax cuts and $1.2 billion in infrastructure spending over the next two years – will help New Brunswick eke out 0.2 per cent real GDP growth in 2009.

Energy companies are slashing capital investment in the oil and gas industries, producing disarray in the Alberta economy and its first contraction since 1986. Sliding manufacturing, construction, and mining output will lead to a decline of 0.5 per cent this year.

British Columbia’s trade-dependent sectors such as forestry, manufacturing and mining are hurting and the pillar of the province’s recent boom – the domestic economy – is suffering as Olympic-related infrastructure projects wind up. Real GDP will decline by 0.1 per cent this year, but an improved global outlook and the timing of the Olympics will help B.C. join Alberta in leading the recovery in 2010.

The malaise in the manufacturing industry is spreading quickly to other sectors of the Ontario economy. The province will face the weakest consumer spending outlook of all provinces, and real GDP in Ontario will fall by 1.2 per cent.

Quebec’s overall real GDP will go down by 0.4 per cent in 2009. The Quebec aerospace industry is now beginning to feel the effects of the global downturn and consumers are becoming more cautious, as 33,000 jobs will be lost this year.

With industrial production and the job market faltering, Nova Scotia’s overall economic growth is projected to fall by 0.3 per cent in 2009.

Despite a positive outlook for consumer spending and construction, Newfoundland and Labrador’s economy will decline in 2009 by 2.6 per cent, the worst performance of all the provinces. Oil production continues to fall off at mature sites and the closure of the newsprint mill in Grand Falls will hurt manufacturing output.

The Provincial Outlook, published quarterly, includes a medium-term forecast for Canada and all 10 provinces. To view the full report, visit