(April 28 –10:30 ET) – Canada’s provincial economies are in better shape than they have ever been in recent memory, say CIBC economists in the latest edition of Observations, the bank’s economics periodical.

While the expansion was triggered by exports to the U.S., home-grown domestic demand, driven by consumer spending, business investment and housing, is now playing a leading role in boosting the provincial economies. A rebound in the resource sector and the rapid growth of the high-tech industries are playing important supporting roles

“While definitions of high-tech vary, Canada’s technology sector is rapidly gaining on the traditional resource sector as a share of GDP,” Joshua Mendelsohn, CIBC’s chief economist, says in a press release. “Moreover, given high-tech’s higher relative rate of growth, the balance is likely to shift in favour of high-tech over the next few years.

“This makes a difference in the way one views provincial prospects. Diversification into a high-growth area like high-tech complements provincial strengths in more traditional areas. This is not to deny the importance of the resource sector, which continues to be highly competitive and a source of strength in virtually all of Canada’s provinces,” Mendelsohn added.

The bank economists offer the following province-by-province forecast:

British Columbia — The economic picture is improving, with expansion of 2.6% expected in 2000 and 3% in. Urban-based industries such as high-tech, film, financial services and tourism are growing rapidly and will more than offset the few areas of weakness like coal mining.

Alberta —Growth is expected to power ahead by 4.5% in 2000 and 4% in 2001 thanks to continued strength in energy, but also in other sectors of the province’s increasingly diversified economy.

Saskatchewan — Growth should improve to 2.5% in both 2000 and 2001 as the province’s oil, agrifood, mining and manufacturing sectors continue to support the economy.

Manitoba — The economy should grow by 2.8% in 2000 and 2.6% in 2001, helped by higher manufacturing shipments, particularly in nickel and other mining products as well as agrifood.

Ontario —Growth shot ahead by an estimated 5.6% in 1999, beating even the red-hot U.S. economy. Continued strength, powered by U.S. demand for Ontario’s manufactured exports and strong domestic demand, is expected in 2000 with growth again in the 5% range. In 2001, with the Federal Reserve reining in the U.S. economy, the province’s growth rate is expected to slip to 3.3%.

Quebec —In 1999, the economy grew 3.7%. As in Ontario, growth could slip a notch, to 2.8% next year, as the U.S. economy slows. Quebec’s economy is being supported by the strength of its manufacturing, resources and high-tech sectors as well as by new construction.

New Brunswick —Growth should be in the 3.5% range in 2000, slipping to 3.0% in 2001. Strong capital spending, export strength in resources and a significant pickup in domestic demand are paving the way for continued good times.

Nova Scotia —With the phasing down of capital spending on the Sable Island project, economic growth is expected to moderate to 3% this year and 2.5% in 2001Halifax should continue to prosper, not just as the commercial and service centre, but as a focal point for telecommunications and high-tech startups.

Prince Edward Island —The outlook is for steady growth of 2.5% this year. In 2001, with a softer North American economy reducing the demand for P.E.I. exports and affecting tourism, growth could slip to the 2% range.

Newfoundland —Offshore oil and gas and the strength of the domestic economy should support growth in the 5% range this year and in the 4% range in 2001.
-IE Staff