Manitoba is pegged by a number of experts to be among the top-performing economies across Canada in 2016. However, the province is still expected to lag well behind what it churned out prior to the 2008 recession.

Lois Mainville, Ottawa-based economist with the Conference Board of Canada, predicts Manitoba will turn in 2.5% growth in gross domestic product (GDP) this year – well ahead of the country as a whole.

“Manitoba is looking good. Its [economic growth] is supported by growth across all key sectors,” Mainville says, citing manufacturing, construction, agriculture, and metals and mining.

Canada’s banks are also calling for Manitoba’s economy to outperform the national average in 2016. For example, Royal Bank of Canada’s report is the most bullish, predicting that Manitoba’s GDP will grow by 2.4%. Canadian Imperial Bank of Commerce‘s report is the least positive, but is still calling for growth of 2% in Manitoba.

The New Democratic Party government of Premier Greg Selinger, which is effectively in election mode ahead of the April vote, isn’t as optimistic. The government downgraded earlier projections of 2.5% growth for 2016 down to 2%, due to the ongoing underperformance of the global economy.

Greg Dewar, the province’s minister of finance, says he’s optimistic that things will improve as a result of recent measures, including the elimination of the small-business tax, which will enable entrepreneurs to invest those savings back into their operations. “We do have good numbers but they’re lower than they were. [Growth] is down since the recession. We’re still doing well relative to other provinces,” Dewar says, adding the core government deficit is projected to be $485 million this year.

Every province is being affected by the plunging Canadian dollar, which is providing a boost to Manitoba, which exports most of its production south of the border.

“Bus manufacturing is a bright spot in Manitoba. New Flyer [Industries Inc.] is performing extremely well,” Mainville says.

A report from the Conference Board predicts Manitoba’s manufacturing sector will grow by 3.4% this year and by another 1.9% in 2017. The construction industry – which is tackling a couple of major hydro projects – will grow by 4.9% and by 11% over the next two years, respectively.

But the loonie’s impact on the rest of the province’s economy has the potential to be devastating, says John McCallum, finance professor at the I.H. Asper School of Business at the University of Manitoba.

With the Federal Reserve Board in the U.S. considering hiking interest rates four times this year, the loonie could dive to historic lows unless the Bank of Canada follows a similar strategy. “I don’t rule out we’re going to have to push our rates up in a terrible economy,” he says.

McCallum believes Manitobans should be happy if their provincial GDP number rings in around 1.75% this year.

His pessimism is based on China’s economy failing to grow by more than 7% for the first time since 2009. He expects U.S. GDP growth to top out around 2.5%.

McCallum predicts that retail sales, vehicle sales, housing and other consumer spending will “hang in there,” but won’t provide the kind of economic boost that they have in rosier times because Manitobans have too much personal debt.

There’s no doubt that politics is playing a significant role in the Manitoba economy, McCallum adds. Selinger is widely expected to lose the April election – the NDP is currently running a distant third in the polls – and the opposition parties undoubtedly will base their campaigns on the financial mess that the NDP has created since coming to power in 1999.

“The election won’t be fought on upbeat economics. All of this affects people,” McCallum notes. “It’s becoming deeply ingrained in the investment community in Manitoba that we don’t balance the budget, regardless of the state of the economy or where we are in the business cycle.”

Of course, all bets are off if Manitoba gets hit with a natural disaster or two, something all too common in recent years.

Last year, the province spent more than $25 million fighting forest fires – but that was just a drop in the ocean compared with the $1 billion spent combatting the flood of 2014 and its aftermath.

On the flip side, Manitoba avoided the drought that hit neighbouring Saskatchewan in 2015 and had a “pretty good” crop year, Mainville says.

The agriculture sector is forecast to grow by 4.4% this year and by 1.4% in 2017.

MANITOBA

Population: 1,292,043

GDP, 2014 ($bil.): 64.2

GDP, % change: 3.5

2015-16 deficit ($mil.): 485

Estimated net debT ($bil.): 36

per capita wage growth, % change, 2015: 2.2

Household disposable income, per capita: $29,004

Figures from latest available reports/estimates

Sources: Conference Board of Canada; Province

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