Canada’s two oil-rich provinces — Newfoundland and Alberta — will experience much higher growth than any other region in Canada in 2002, while the industrial provinces of Ontario and Quebec will struggle to recover from this year’s economic downturn, CIBC economists predicted today.

With the September 11 terrorist attacks, both the U.S. and Canada have likely entered recessions that could drag on into the early part of 2002, CIBC said. However, very aggressive easing by the U.S. and Canadian central banks combined with increased government spending will result in a gradual pickup in economic conditions through 2002, lifting Canadian economic growth to 2% next year, compared with an expected 1.5% in 2001.

“This comparatively sluggish overall performance masks the fact that certain parts of the country are going to grow strongly between now and the end of next year,” said CIBC chief economist Josh Mendelsohn. “Unfortunately, it also means that other areas will experience much slower economic expansion in the same period.”

For most provinces, the outlook for the remainder of 2001 is for further deterioration. Ontario and Quebec have been hard hit by the weakness in U.S. manufacturing which spilled across the border in the first half of 2001.

The recent terrorist attacks will only intensify the cyclical adjustment challenges facing the Canadian manufacturing sector by making U.S. consumers more defensive and by reducing or deferring business investment decisions. Weak commodity prices due to the overall sluggishness of global industrial production have hurt resource production across the provinces.

The likely imposition of either U.S. duties or an export tax on softwood lumber has already hurt B.C.’s economy. Drought conditions, particularly in Saskatchewan, have contributed to the ongoing problems of grain farmers although world prices have now improved. On the positive side, oil and gas production, distribution and exploration activities have continued to be highly supportive in Alberta, Newfoundland and Nova Scotia.

“We expect 2002 to be a somewhat stronger year for economic growth in nearly all of the provinces,” said Alister Smith, CIBC’s deputy chief economist and author of the report. “Barring further horrendous shocks such as the Sep. 11 attacks, monetary stimulus and fiscal actions on the scale undertaken in the U.S. and, to a lesser extent, Canada should eventually prevail and turn economic conditions around. But this recovery could well be slow and grinding, unlike the strong rebounds we’ve seen from previous recessions.”