Newfoundland to lead nation in growth
Globe and Mail
Two large oil and mining projects will propel Newfoundland and Labrador to lead the country in economic growth this year, although oil-rich Alberta will re-emerge as the fastest-growing provincial economy by 2007.
A Bank of Nova Scotia report released Thursday said that higher production at the White Rose offshore oil field and at Voisey's Bay nickel mine, coupled with record high commodity prices, will push Newfoundland and Labrador from the very bottom to the very top of the provincial growth scale in 2006.
Newfoundland's will lead the provinces with 6 per cent real gross domestic product expansion this year, Scotiabank forecasts, up from 0.4 per cent in 2005.
"However next year's growth should slow as the province's expanded oil and nickel production come fully on-line and fewer new capital projects enter the pipeline," said Scotiabank economist Meny Grauman.
By 2007, Newfoundland's projected economic growth is expected slow to 2 per cent, while Alberta reclaims top spot with 4 per cent growth.
Alberta, whose economy is roaring ahead on the back of its oil and gas riches, is forecast to post GDP growth of 5.5 per cent this year, after expansion of 4.5 per cent in 2005, according to Scotiabank's projections.
Soaring crude oil and gas prices have spurred an unprecedented level of capital investment in Alberta, with companies rushing to get in on developing of the massive oil sands projects. "As energy projects continue to attract billions of dollars in domestic and international investment, the service companies, wholesalers, construction firms and manufacturers that cater to these projects also benefit," Mr. Grauman said.
The provincial government estimates there are 1,021 large-scale capital projects ventures in Alberta, with a combined market value of $133-billion. Just six are directly related to oil and gas, but they account for 65 per cent of all project spending.
Unemployment in Alberta is at record lows, leading to labour shortages and migration from other provinces.
Inflation remains moderate, but there is an "increasing number of anecdotal reports of cost overruns in the oil patch, and price pressures are mounting in the province's labour, construction and real-estate markets," the Scotiabank report said. There are also increasing concerns about environmental sustainability of the province's large development projects.
"Canada's economic performance map is being fundamentally reshaped by concurrent booms in the resource and construction sectors," the report said. Although Canada's economy will continue to enjoy solid growth this year, the pace of expansion will moderate in 2007.
The Scotiabank forecast says on a national basis, GDP growth is expected to come in at 3.3 per cent this year, and slow to 2.8 per cent in 2007. Canada's economy grew 2.9 per cent in 2005.
Surging global demand is creating the background for rapid Canadian economic growth, driven by expansion in the resource and construction sectors, the report said.
"Much of this strength reflects the persistently strong demand, and sky-high prices, for commodities that has been triggered by the rapid economic advances in many of the developing nations whose low costs have turned them into manufacturing powerhouses," Mr. Grauman said.
Canada, in turn, is experiencing a surge in investment as companies and governments find, produce, and deliver the energy and metals needed to support the expanding global economy.
British Columbia's economy will benefit from a bevy of construction projects ahead of the 2010 Winter Olympics in Vancouver, Scotiabank said. The province's lumber industry will continue to suffer, despite the softwood lumber deal reached with the United States.
B.C.'s economy is forecast to expand 4 per cent this year and 3.6 per cent in 2007, after growing 3.5 per cent last year.
The economies of Saskatchewan and Manitoba are both slated to expand 3 per cent this year, and 3 per cent and 2.8 per cent next year, Scotiabank forecast.
Ontario's economic performance will trail the national average as public sector investments in health care, education and infrastructure support growth at the same time as residential home building slows and manufacturers restructure.
The province's GDP is expected to slow to 2.7 per cent in 2006 and 2.3 per cent in 2007, after growing 2.8 per cent last year.
In Quebec, the strong loonie will pressure the province's textile and forest industries. The province's growth is forecast to come at 2.5 per cent this year and 2.3 per cent next year, after growth of 2.2 per cent in 2005.
Economic growth among the remainder of the Atlantic provinces is expected to average around 2.2 per cent this year, Scotiabank said. New Brunswick will outperform Nova Scotia and Prince Edward Island this year while PEI slips to the weakness growth among all of the provinces in 2007.
