European crisis, halt in China, gloom in the United States… Although the Canadian GDP continues to grow in these troubled times for the global economy, prospects for growth are now revised downward, according to the RBC Provincial Economic and Financial Outlook. And significant provincial disparities continue to emerge.
With a subdued second quarter and projected growth that looks moderate for 2013, here are the conclusions from the Provincial Economic and Financial Outlook, published by the Economic Research Service of RBC in early September.
Why is this picture decidedly pessimistic? According to RBC Economic Research Service experts, conditions in which provincial economies are developing this year are difficult. Among the heaviest burdens for the Canadian economy are the difficulties suffered by all European countries, the slowdown in Chinese growth, the economic lethargy experienced by the United State and the slowing global market for goods and commodities. These are international factors that involve and contribute to Canada’s own problems, tightening Federal and Provincial budgetary constraints ahead.
While economic forecasts were released last spring that were modest but still encouraging, it is now clear that these projections have not been reflected by core economic realities. Hence there is a lowered calculation in September 2012 for potential growth of the national GDP, which has now lost a half point, to 2.1%.
Nonetheless, it should be noted that all Canadian provinces are continuing to experience economic growth. Better still, the cumulative annual results reported by RBC show sustained growth across the country. The only downside is therefore that it is not moving ahead as much as desired, with many disparities emerging. Thus, the Western provinces, as with 2011 results, should continue to serve as the economic engine, while the East, embroiled in broader budgetary constraints, are likely to have more difficulties.
British Columbia: slightly above average
British Columbia is recording encouraging signs for 2012 and shows some good results, although uneven. Although the job market is one of the strongest in the country and consumer confidence does not seem to be blunted, as shown by overall retail sales figures, wood exports have sagged and real estate and construction, among other areas of activity, are now experiencing some difficulties. Another negative factor for the province is the drastic fall in natural gas exports to Europe. This irregularity explains the provincial GDP growth forecasts now set at 2.3% for 2012, compared to the 2.9% in 2011. This decline should only be temporary – two major industrial and naval projects should enable the province to achieve a growth of 2.7% in 2013.
Alberta: excellent results
While in 2011 Alberta had growth estimated at some 5.2%, it seems that once again this year the province is taking the lead in economic forecasts. With growth estimated at 3.8%, it indeed appears well above the national average. With low unemployment, dynamic consumption, real estate market in good shape, building and housing starts up 47%, vigorous energy sector… All the indicators look good and bode well for good growth in 2013.
Saskatchewan: good harvests
The key factor in Saskatchewan’s economic expansion is the quality of its harvests, and agriculture in general. Although nature can be capricious, this year the province is enjoying a situation that is largely to its advantage, with a drought that has afflicted the agricultural belt in the United States, greatly curtailing production of grains, and the worldwide crop declines in most agricultural parts of the globe, the prices of agricultural products have steadily increased. This is a boon for the province, allowing for a forecast growth in its GDP of 3.2% over the year, in spite of some difficulties encountered in the mining and construction industries.
Manitoba: when the weather calls for growth
In Manitoba as well, agriculture should support growth opportunities and looks to be the engine of the provincial economy. After two years of unfavourable weather conditions, Manitoba is benefiting this year from a very considerable improvement. According to Statistics Canada, although the combined production of wheat and canola declined significantly in 2011 and 2010, the situation is expected to change in 2012, with production up by 62%. This should offset weakness in the manufacturing sector and give the province a growth forecast of 3.3% GDP.
Ontario: identical prospects
Despite a pallid context, severely marked by budgetary constraints, Ontario maintains its growth and is even managing to raise its forecasts over last year. From 1.9% GDP growth in 2011, the province reached 2.2% this time. This tepid growth is due, among other factors, to the energy of its real estate sector and resumption of exports.
Québec: general lack of vigour
Bad news for Quebec: real monthly GDP estimates published by the Institut de la statistique du Québec declined in the first four months of 2012. And RBC forecasts seem to confirm this situation, announcing a GDP growth forecast for 2012 in the order of only 1%. Multiple factors are involved, including stagnant production in manufacturing, retail and construction and reduced activity in public services, agriculture, forestry and arts and recreation. Some other special factors are the student protests, which have not failed to attract the attention of all economic players, and the fears about global economic shocks and a particularly warm winter that has altered seasonal activities. Temporary, these few barriers should give way to better prospects in 2013, where GDP expansion will regain its stride, around 1.7%.
Atlantic Canada: (very) moderate growth
Moderation and a wait-and-see attitude – this is how to summarize growth forecasts for Atlantic Canada in 2012. 1.5% GDP growth in Newfoundland and Labrador, 1.3% in Nova Scotia, 1% in New Brunswick… With its estimated 1.8% GDP growth, Prince Edward Island once again leads the way in the region, supported by its exports of machinery and equipment and favourable data identified in the agriculture and fishing industries. The other Atlantic Provinces suffer glaring difficulties in the energy sector and show weak outlook for nest year, with the exception of Newfoundland and Labrador, where targeted investments should enable achieving some 3.3% GDP growth in 2013.
Alberta in the lead, Quebec trailing: revised and corrected downwards, the growth forecasts for the year underway remain, with a few exceptions however, the stated topography for the Canadian economy this year. And in an ongoing precarious international context, it should be noted that none of these growth projections are below the fateful bar of 1%.