Improving energy prices put Alberta, Saskatchewan and British Columbia at the high-end of expected growth
Improving oil prices are expected to help drive better economic growth in Canada in 2017, with the strongest forecasts being reported for traditionally energy-producing parts of the country, according to The Conference Board of Canada (TCBC).
Alberta and Saskatchewan are expected to emerge out of recession and lead the provinces in economic growth this year, the group said. British Columbia is forecast to see growth ease this year, but the province will still tie with Saskatchewan for second place.
Following two years of contractions, Alberta’s economy is expected to outperform all provinces and grow by 3.3% this year. Non-conventional oil production in the province will see a big increase this year thanks to new capacity coming online, while energy investment is expected to make a comeback this year and next.
Outside of the energy sector, Alberta is benefiting from improvements in labor markets, consumer demand, and the housing sector. A bright outlook for the province’s manufacturing sector as a result of the new Sturgeon refinery, along with the rebuilding efforts in Fort McMurray, will also contribute to Alberta’s strong economic growth this year, according to TCBC’s forecast.
Drilling in Saskatchewan has rebounded since last winter and oil production is expected to increase over the near term. Low oil prices have also led to stronger investment into more cost-effective thermal extraction technology, which TCBC expects will translate into a significant boost in construction over the next three years.
The province’s labor markets are also starting to turn around, boosting growth in household spending. In all, Saskatchewan’s economy is forecast to grow by 2.5% in 2017.
Tied with Saskatchewan for the second-most economic growth in the forecast is British Columbia after growing 3.7% in 2016. The province’s housing market is losing steam, and many of British Columbia’s sectors, particularly the forestry industry, are expected to see growth ease.
Ontario, Manitoba and Quebec are expected to see their economies grow 2.3%, 2.1% and 1.8%, respectively this year. The three provinces will benefit from different catalysts from growing exports, stronger construction markets and more consumer spending.
Atlantic provinces will struggle more than most
While the majority of Canada’s provinces are expected to grow in 2017, those along the Atlantic will see only modest growth, or contraction, as they deal with an aging population that limits growth in labor markets, The Conference Board of Canada said.
Newfoundland and Labrador is the only province expected to see real GDP contract in 2017, with the forecast calling for the economy to shrink 3.0% this year. The province will benefit from oil production at the Hebron project starting next year, and real GDP is forecast to rebound after 2017.
The economy of Nova Scotia is forecast to grow 0.5% this year buoyed by shipbuilding in Halifax, but the construction industry is expected to decline over the next two years as major projects are completed. Weak investment is also expected to hurt New Brunswick’s goods-producing sector, which is expected to grow 1% this year.
Prince Edward Island has the best growth prospects among the Atlantic provinces, with real GDP forecast to expand by 1.8% in 2017. The Island’s economy is being bolstered by tourism as well as by a strong performance in the manufacturing sector, especially in the food products and in aerospace services.