National Bank of Canada says it expects Canada’s economic growth to be 3% this year and 2.7% in 2007.

Chief economist Clement Gignac says that Canada’s economic fundamentals are the best they have been in 50 years. However, Gignac says regional disparities in economic growth remain and could increase. Newfoundland and Labrador is expected to lead the way this year with growth of 6% while Quebec is expected to come in at 2%.

He also said the strong economy could push the Canadian dollar to parity with the U.S. dollar in 2007, and while some Canadian exporters find it difficult to compete most of them are positioned to adapt to the new reality.

Gignac notes the uneven spread of the country’s natural resources is contributing to growing regional disparities, making monetary and government policies more challenging.

“With the Canadian economy going at full capacity and an inflation rate moving away from the Bank of Canada’s 2% target, we have to expect an increase in interest rates this summer,” he says.

“The current synchronized monetary tightening by central banks worldwide should lead to a deceleration in economic activity as of 2007,” he adds.

National Bank predicts a growth rate of 3.3% for the United States this year and 2.4% in 2007.