TD Bank economists argue that Canada’s economy is going to become less resource-based and more services and high-tech oriented during the next decade.

In a report released this morning, TD Economics suggests that the so-called “new economy” sector should emerge from its current slump this year, and lead Canadian industries in growth from 2002 to 2010. “Canada’s economy is projected to become even less resource-based, more heavily ‘wired’, and more service-driven than ever before,” said Derek Burleton, senior economist at TD Bank.

“By 2010, the volume of output in the nation’s information-technology sector is likely to virtually match that of the resource sector. “Looking beyond the cyclical weakness experienced in recent months, businesses will continue to see a hefty longer-term financial payback from adapting these new technologies,” he added.

The resource sector is losing ground in terms of relative importance, thanks to a combination of toughening environmental regulations, declining resource availability in some industries, and competition from low-cost foreign producers.

However, Burleton said that not all resource industries are in for a tough time, “One notable pocket of strength is the oil and gas sector, whose relative share of GDP is likely to rise over the 2001-10 period, driven by a hungry U.S. market, and bright prospects for development in the western oilsands, off the east coast, and in northern Canada.”

In addition to the resource sector, the manufacturing and construction sectors will likely also become less important over the coming decade. “Although manufacturing enjoys the best overall prospects among Canada’s goods-producing sectors, the expansion in manufacturing output is unlikely to match the booming pace chalked up during the 1990s,” said Burleton.

One trend of the last 20 years that is expected to continue over the next decade is the dramatic increase in the economy’s reliance on private-sector service industries. The relative importance of the public sector, which slid sharply during the mid- and late 1990s, is expected to decline further over the next decade.

Demographic shifts should support growth in other private-sector services industries, apart from the new economy. “Most notably, the finance and insurance industry will be supported by the ongoing pressures to save and invest for retirement, while increased tourism and leisure spending by a growing list of retirees will provide support to consumer-oriented service industries such as accommodation and food.”

TD also sees greater integration between the U.S. and Canadian economies, as Canadian exports to the U.S., and U.S. imports into Canada grow further as a share of Canada’s GDP. “With the exception of commodity-related shocks, which should diminish in impact as the resource share of the economy declines, the Canadian and U.S. business cycles are expected to become more synchronous over time,” Burleton concluded.