Alberta and B.C. to lead Canada’s economic growth in 2017/2018
November 27, 2017 by Conference Board of Canada
Nov. 27, 2017 – Alberta’s economy is set to lead the country this year, with robust economic growth of 6.7 per cent. Next year, however, the province will take a back seat to British Columbia, who will emerge once again as the provincial growth leader, according to The Conference Board of Canada’s Provincial Outlook: Autumn 2017.
“Thanks to rising oil production and a swift turnaround in drilling levels, Alberta surged out of recession this year. But, the rebound has been unsustainably fast, implying the pace of recovery will moderate in 2018,” said Marie-Christine Bernard, Director, Provincial Forecast, The Conference Board of Canada. “Next year, with strength in many sectors, British Columbia’s economy is poised to outpace all other provinces and will be one of only three provinces with growth above 2 per cent.”
• Alberta will outpace all other provinces this year with incredibly rapid real GDP growth of 6.7 per cent.
• Newfoundland and Labrador will be the only province that will see an acceleration in economic growth next year. All other provinces can expect slower growth in 2018, but for most the pace will remain healthy.
• British Columbia is forecast to enjoy real GDP growth above the national average next year, with the provincial economy expanding by 2.7 per cent.
• Ontario’s increase in the minimum wage will temper the pace of job growth. The higher cost of labour with reduce the pace of employment growth by 29,000 positions in 2018 and an additional 12,000 in 2019.
Alberta’s economy is set to grow by a robust 6.7 per cent this year. Several sectors came out of recession, but it was the swift pickup in drilling and solid oil production that led economic growth. The domestic economy also performed well, as consumer demand picked up, boosting retail sales and housing construction. But the booming growth is not expected to last, with Alberta’s economy forecast to grow at a more sustainable 2.1 per cent in 2018. However, recent strength in oil prices could help maintain the momentum in drilling and push economic growth higher over the near term.
British Columbia is forecast to enjoy real GDP growth of 3.2 per cent this year. And, while slightly weaker growth of 2.7 per cent is anticipated for 2018, B.C. will still outpace all other provinces in economic growth. One of the factors behind the slowdown next year is the cooling off in the housing sector. Measures implemented to cool demand and continued challenges related to housing affordability have led to a small decline in housing starts this year and they are forecast to remain virtually flat next year. The cooling off in the housing sector will trickle down through the economy and lead to slower growth in employment, income, and, most significant of all, consumer spending. Meanwhile, the province’s forestry sector is expected to be either flat or negative over the next five years due to ongoing problems with the mountain pine beetle infestations and duties imposed by the U.S. on Canadian softwood lumber imports.
Having faced a milder recession than Alberta’s in 2015 and 2016, Saskatchewan’s rebound this year will be more muted. Real GDP in Saskatchewan is expected to advance 2.1 per cent in 2017 and by a more moderate 1.6 per cent in 2018. Labour markets remain stuck in neutral and are not powering consumer spending. On a more positive note, prospects for the province’s primary sector are brighter. The potash industry is increasing production and global market conditions are improving, and that is expected to carry over into 2018. The energy sector is benefiting from new technologies that are stimulating investment, and the recent strength in oil prices will help sustain the number of wells drilled in the province.
Manitoba has been benefiting from heavy investment by Manitoba Hydro since 2015, which has provided a big boost to real GDP growth. However, with the development of the Keeyask generating station still under way and construction of the Bipole III transmission line moving ahead, investment in the province is expected to peak in 2018 and their completion will be a headwind to growth in 2019. A second blow to economic growth are the large declines in metal mining production expected from now until the end of the decade. Overall, real GDP in Manitoba is expected to expand by 2.9 per cent in 2017, before slowing to 1.3 per cent next year.
A cooldown in consumer spending will hold economic growth to just 2.0 per cent in Central Canada next year. Ontario’s economy is expected to grow at a robust pace of more than 3 per cent this year, but difficulties on the trade front, as well as slowdowns in the housing market and consumer spending will limit growth to 2.0 per cent in 2018. Ontario’s increase in the minimum wage will temper the pace of job growth. The higher cost of labour with reduce the pace of employment growth by 29,000 positions in 2018 and an additional 12,000 in 2019.
While the compensation increases will give more than one million workers earning less than $14 per hour more money to spend, consumer demand is expected to grow at a slower pace next year due to elevated consumer debt. Meanwhile, more stringent mortgage-qualifying requirements and rising mortgage rates will cut into new housing construction in 2018–19.
Quebec’s economy saw significant improvement this year, with the provincial economy forecast to grow 3.2 per cent in 2017. The province did well on several fronts, but it was solid consumer demand that was the decisive factor behind the renewed strength and optimism in the province. The recent strong economic momentum is expected to lose speed quickly, however, as the pace of consumer demand is forecast to weaken. Overall, real GDP growth is expected to slow to a still-solid 2.0 per cent in 2018. The province could also be facing challenges on the trade front. With 70 per cent of exports destined for the U.S market, the renegotiation of NAFTA could change the playing field for many exporters, and that provides risks to the outlook.
The Atlantic provinces are experiencing economic growth well below the national average this year, as the region is hurt by weak job creation and the aging of the population. Next year, growth will be even more modest in all of the Atlantic provinces, with the exception of Newfoundland and Labrador. Newfoundland and Labrador’s economy will contract by 3.1 per cent this year, but is forecast to see real GDP growth of 2.4 per cent in 2018 thanks to new oil production at the Hebron platform.
Underpinned by a competitive Canadian dollar, Prince Edward Island’s tourism and export sectors are expected to grow at a solid pace, bolstering overall economic growth by 2.3 per cent this year. However, P.E.I.’s economic growth is expected to dip to 1.3 per cent next year as construction of the electric transmission line to New Brunswick is completed.
Nova Scotia and New Brunswick have some of the weakest near-term growth prospects in the country. Both provinces will see health care spending grow at a strong pace, while at the same limited gains in employment will hold back household spending. In Nova Scotia, real GDP growth is forecast at 1.3 per cent in 2017 and 1.0 per cent in 2018. With the delivery of the first vessel under the Arctic and Offshore Patrol Ship (AOPS) program scheduled for 2018, activities at the Halifax shipyard will continue to support growth in the manufacturing sector. International immigration has been exceptionally strong in recent years, and that has boosted the labour force numbers in Nova Scotia. As for New Brunswick, the decline in the labour force is limiting economic growth to 1.5 per cent this year and just 0.8 per cent in 2018. The prospects for the mining sector are favourable over the near term, but the forestry sector faces more difficulties with trade tariffs.