All Provinces Ready for Recovery in 2010: BMO

Most Canadian provinces that experienced economic downturn in 2009 will start to see their economies rebound by 2010, according to the new Provincial Outlook report from BMO Capital Markets.

A sharp rebound in commodity prices, followed by widespread fiscual stimuli and a low- interest-rate environment have helped set the stage for recovery.

Ontario’s real GDP is expected to contract by 3.1% for 2008. But by 2010 the province will likely experience a 2% recovery. Troubles in the auto sector will continue to cripple the province’s growth.

“Employment in the auto assembly and parts sectors has fallen to the lowest level since the early-70s,” says Robert Kavcic, an economist at BMO Capital Markets. “As the year progresses, more weakness is expected. As a result, Ontario’s unemployment rate is likely headed toward 10% for the first time since 1994.”

However, Ontario is expected to experience a better than average recovery. The economy will get a boost 27.5 billion infrastructure spending by the province coupled with $5 billion in federal funding. Also, the likelihood of a U.S recovery by the end of 2009 is expected to intiate a rebound in auto sales by 2010.

But growth will not be sustained for a long period. The liklehood of the loonie reaching parity with the greenback will be a challenge for Canadian manufacturers.

Manitoba’s diverse manufacturing sector has helped it weather through recession relatively well. Construction activity in the province has remained a pillar of strength this year, and should continue to support the economy through 2010

Strong capital investments, on the other hand, have softened the blow of an economic downturn in New Brunswick. In 2009, real GDP will contract by a better-than-average rate of 1.3% but is set to rebound by 1.7% in 2010.

In Alberta, recovery will be closely tied to oil prices. Real GDP is expected to contract by 2.7% in 2008, but in 2009 the province will likely experience an above-average recovery of 2.2%.

Two factors will likely support Alberta’s energy sector as it moves into 2010: A global economic recovery that will support robust commodity prices. And lower input costs, brought down by the break-even price on marginal oilsands projects — down to about $60 from nearly $100 at the height of the boom.

While other provinces have been hard hit by the recession, Saskatchewan will likely be be the only province to record growth in 2009. This year, its economy is expected to grow by 0.4% and expand by 1.9% in 2010.

The diverse commodity mix, one of the province’s mainstays — oil, uranium, potash and other agricultural products – has helped it weather the downturn.

Meanwhile, a steady population growth has helped domestic demand and the housing markets.

While Newfoundland and Labrador will likely suffer the deepest drop in GDP this year among the Canadian provinces, 2010 will see a significant rebound of 2.4%.

“Lower offshore oil output and a more recent slowdown in domestic activity will mean a contraction of real output by 3.5% this year,” says Kavcic “But growth will be rekindled, with a 2.4% rebound in 2010.”

British Columbia has been among the hardest-hit provinces during this recession, and what started out as forestry-specific downturn eventually spread to the construction, energy and consumer sectors.

“Real GDP will likely contract 2.5 % this year, with the prospects for recovery pointing to a slightly above-average 2.0% advance in 2010,” Kavcic adds.

The economy is expected to get a significant boost, albeit short-lived, from business generated by the 2010 Olympics. Infrastructure spendinng is also expected to help stimulate growth for a longer period.

In Nova Scotia robust non-residential construction activity prevented the provice from experiencing a contraction in 2009. Its real GDP for this year is likely to increase by 0.9%, and is projected to rebound with 1.5% growth.

The P.E.I. economy is under pressure as consumer and construction activity have weakened. Real GDP will likely fall 2.0% in 2009, followed by a modest 0.9 % recovery next year.

In Quebec, real GDP will likely contrat by 1.6% this year, before experiencing an above- average recovery of 1.9%. Nonresidential construction will bolster this province. The Quebec government has embarked on a five-year, $41.8 billion infrastructure spending program that will continue to drive growth, as will ongoing investments by Hydro-Quebec.

This story was originally published by Canadian Insurance Top Broker.