Canada On The Road To Recovery, According to Scotia Economics

TORONTO , Dec. 23 /CNW/ - As consumer spending rebounded, investment returned in line with thawing credit markets, and government taps opened the flow of stimulus project spending, Canada climbed its way out of recession in the third quarter of 2009, according to Scotia Economics' latest Provincial Trends report.

"That Canada escaped from the global slump fairly quickly is reflective of our relatively healthy household balance sheets and stable financial system," said Alex Koustas, Economist, Scotia Economics. "However, the modest pace of the recovery highlights the ongoing trade and competitive hurdles that need to be overcome in order to return to stronger growth.

"Meanwhile, the regional disparity in growth across Canada will continue in 2010 with the Canadian dollar expected to remain strong, while commodity producers benefit from a rebound in global markets," continued Mr. Koustas .

Atlantic Canada managed to weather the economic downturn relatively well. Although Newfoundland and Labrador was affected by a combination of declining resource values and production shutdowns, the other provinces in the region performed well above the national average in a number of categories.

"We expect Atlantic Canada's recovery to be less pronounced, as a number of sectors have less room for expansion with the completion of several major capital projects," commented Mr. Koustas .

Ontario and Quebec have witnessed two very different performances this year. Ontario was sideswiped by the slowdown in the United States , with curtailments in automobile production sending shockwaves through the economy. Quebec's more diversified manufacturing base and export markets allowed it to sidestep the worst of the recession. However, the tables will likely turn next year, as a rebound in manufacturing and a turnaround in construction boosts activity in Ontario, while Quebec's economy, though solid, lags behind.

Resource recovery will be the main story for Western Canada in 2010. Saskatchewan's economy likely contracted this year, as potash production was curtailed more than anticipated. Nonetheless, Scotia Economics foresees a turnaround for potash in 2010, with a double-digit increase in light crude production rounding off a stronger year for the resource sector.

Provincial Outlook

British Columbia

B.C. is expected to rebound in 2010 with GDP growth of 3.0 per cent. The turnaround will be propelled by stronger resource values, increased transportation activity and the Winter Olympics.

Alberta

Alberta is expected to get back on the growth track in 2010, posting a 2.9 per cent increase in real GDP. Higher commodity prices, strengthening non-residential construction and buoyant infrastructure investments will underpin the rebound.

Saskatchewan

Saskatchewan is expected to experience GDP growth of 2.8 per cent in 2010, supported by interprovincial migration, a recovery in resources and infrastructure spending.

Manitoba

Manitoba has shown resilience in 2009 and is expected to return to a steady growth path in 2010 with a rebound of 2.6 per cent, underpinned by hydro utility development and solid manufacturing activity and investment.

Ontario

Ontario is expected to experience a 2.7 per cent rebound in growth in 2010. The auto sector and stimulus programs will lead the recovery, with solid service sector growth providing an added boost.

Quebec

Quebec has shown remarkable resilience throughout the economic downturn despite a battered forest products sector and a marked decline in petroleum product exports. The province is expected to post moderate growth of 2.2 per cent in 2010.

New Brunswick

New Brunswick is expected to underperform the national average slightly in 2010 with a rebound of 2.1 per cent as market conditions in forest products remain fairly challenging and some construction activity winds down.

Nova Scotia

Nova Scotia's economy is expected to rebound with growth of 2.2 per cent in 2010, supported by continued strength in services and some resource gains.

Prince Edward Island

Prince Edward Island weathered the recession relatively well, as exports and tourism traffic remained relatively stable in 2009. The province is expected to rebound with GDP growth of 1.9 per cent in 2010, though its recovery will be less pronounced than the Canadian average.

Newfoundland & Labrador

Newfoundland and Labrador's growth fell sharply in 2009, as commodity prices, oil in particular, plummeted in late 2008 and remained at a low ebb in early 2009. The province is set to get back on track and outperform the national average with GDP growth of 2.9 per cent in 2010.

Scotia Economics provides clients with in-depth research into the factors shaping the outlook for Canada and the global economy, including macroeconomic developments, currency and capital market trends, commodity and industry performance, as well as monetary, fiscal and public policy issues.

For further information: Alex Koustas, Scotia Economics, [phone], [email protected]; Robyn Harper, Scotiabank Public Affairs, [phone], [email protected]