The latest Provincial Outlook Economic Forecast released by the Conference Board of Canada indicates some optimism for 2012 and 2013. After modest growth this year, most provinces should benefit from an upturn.
The forecasts are positive, but should be interpreted with some caution. While the private sector will start recovering in 2012, thus paying for major federal and provincial infrastructure-related spending, regional economies are not protected from experiencing some unrest directly caused by the European debt crisis.
This is a tangible threat that could lead to a revision of the current degree of optimism, and that in addition to U.S. difficulties, could hobble the growth of the Maritime and central provinces. Through a rebound effect, the latter could find themselves suffering from the current anemic growth in the U.S., and from necessary budget austerity measures imposed by their respective governments. The situation highlights major provincial disparities, with Western Canada conversely promising to post the best results once again, thanks to high commodity prices and large energy sector investments.
The Maritimes and central provinces on the sidelines
Ontario and Quebec, somewhat behind, will have to focus their efforts on reducing their public deficits over the next few years. These unavoidable budget cutbacks hinder the outlook for the next two years, when combined with the rather moderate forecasts for private investment and consumer spending. Ontario’s GDP is expected to increase by 2.2%, barely more than the 1.8% expected this year, while Quebec’s should grow by only 1.8%, vs. the 1.5% expected in 2011. New Brunswick, which is suffering from the lull in construction and is struggling to spur manufacturing development, should post modest growth of 1.5%.