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Canada Holds Steady; Officials Excited for 2015 

fall canada profile

Interview conducted by Rachel Duran

Forecast for western provinces is promising.
Editor’s Note:
This interview was conducted July 14, 2014. For the latest information in regard to the forecast for the Canadian economy, visit www.conferenceboard.ca.

Canada’s economic outlook continues on a steady and moderate growth pace due to weak housing markets, investment intentions, and exports, among other components. Expect 2015 to be the year things turn around, with a projected growth rate of 2.7 percent.
The country’s western provinces have strong economic growth prospects, and Alberta will continue as one of the nation’s strongest provincial economies.
Rachel Duran: Canada’s economy has been holding steady, experiencing moderate growth. When do you expect to turn the corner?
Marie-Christine Bernard: The Canadian economy has been growing at a moderate pace throughout 2013 and 2014. The first part of this year was quite weak, especially in the first quarter. We felt the repercussions of the weak winter. It affected the U.S. economy and also the Canadian economy through fewer exports and a weaker housing market.
We expect the Canadian economy to advance by 2 percent in 2014, which is similar to 2013. Some improvement is expected in 2015 with the Canadian economy advancing by 2.7 percent.
Canada is experiencing moderate growth in the domestic economy. We have weaker growth in employment, which can be felt throughout most of Canada. Employment numbers are stronger in the western provinces. The Canadian economy has also seen an easing in the housing market, as well as weaker investment intentions for the private sector. So there is weaker growth in nonresidential and machinery and equipment, which should be temporary.
In 2015 we will see much stronger investment growth. There will also be better prospects for the consumer. Interest rates are low right now, expected to increase in the middle of 2015.
What is holding back the Canadian economy is the weak performance in the trade sector. Exports were weak in 2013, and so far this year we haven’t seen strong growth. We are hopeful the stronger prospects forecasted for the U.S. economy will result in a better trade outlook for Canada.
Finally, as we have discussed in the past, there is still fiscal restraint at the federal level. We are a year away from having a balanced federal budget. Things are more difficult for the provinces, as most do not have balanced budgets, with many facing considerable deficits. Even those that have balanced their books are very careful with their spending. As a result we are not seeing a lot of stimulus coming from the public sector at this time.
Duran: Marie-Christine, you mentioned favorable job growth in the western provinces. Please detail.
Bernard: For British Columbia, the economy has been growing moderately, similar to Canada. Last year was particularly difficult because we saw a decline in employment, and very weak domestic demand.
However, going forward prospects are improving for British Columbia. We expect moderate growth again this year. Last year the economy grew by 2 percent, this year we expect it to grow by 2.4 percent, and we forecast a much stronger growth of 2.9 percent in 2015.

What is holding back the Canadian economy is the weak performance in the trade sector. Exports were weak in 2013, and so far this year we haven’t seen strong growth. We are hopeful the stronger prospects forecasted for the U.S. economy will result in a better trade outlook for Canada.

There are bright prospects for British Columbia in a number of areas. The forestry sector should benefit from the rebound in the U.S. housing sector. It will lead to strong growth in the forestry sector in 2014; a little less in 2015, but the sector will continue to expand. Looking past 2015 the forestry sector will not be an area of strength for British Columbia due to constraints on the supply due to the pine beetle infestation epidemic.
In regard to the province’s manufacturing sector, we do expect strong growth in 2015 in part due to the shipbuilding program in Canada. One of the shipyards in Vancouver was awarded part of the large naval contract. Work will get underway in 2015. Nova Scotia on the East Coast was awarded the larger part of the contract. The government plans to spend $25 billion over 30 years.
In regard to investments, they have been weak in British Columbia this year, but should rebound in 2015. There are strong prospects in the province’s mining sector and the energy sector. The housing sector is doing well, as is the resale market.
Duran: In regard to Alberta, the economy has been performing well for a few years. What’s the update?
Bernard: The province has being doing well for the past five years, and the forecast is still very robust. Oil prices remain high, and there is still a lot of investment taking place in Alberta’s energy sector, in particular in the oil sands. This investment remains elevated, although not increasing at a rapid pace anymore.
The Alberta economy advanced by 3.9 percent in 2013 and it will grow above 3 percent during the next two years; 3.6 percent in 2014, and 3 percent in 2015. The job market remains robust, even though it is slowing.
Wage increases are strong in Alberta, as well as consumer demand and retail sales. For instance, while the housing market is easing in Ontario, it is accelerating in Alberta, and housing starts will remain elevated in 2015. The resale market has benefitted from the demand for new housing.
Alberta is almost a province on its own. When the energy sector does well, the province tends to do well.
In fact, there are not many negative points for Alberta’s economy. As we move forward — a lot of growth in the past few years has been fueled by investments in the oil sands — we are hearing about transportation capacity issues, pipelines. The Keystone XL pipeline has not been approved. And proposed lines in Canada are still in the regulatory or proposal stages.
We will have to watch closely in regard to what happens with the pipelines. Irrespective of that, the investment in the oil sands has been accelerating. It will level off the next few years. A lot of the growth in Alberta will come from the export market, and not as much from investments as the additional oil production capacity is moved to markets outside of Alberta.
All the investment will pay off in terms of higher oil production. The province also remains a destination of choice for many workers outside of the province, both from other provinces and international locations.
Marie-Christine Bernard is the associate director, provincial forecast, for the Conference Board of Canada. She can be reached by emailing bernard@conferenceboard.ca. The Conference Board of Canada is the foremost independent, not-for-profit, applied research organization in Canada. Visit the organization at www.conferenceboard.ca.

 

Illustration by David Castillo Dominici

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About the author: Rachel Duran

Rachel Duran is the editor in chief for Global Corporate Xpansion. Contact her at rduran@latitude3.com.

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