(May 30 – 14: 25 ET) – Canada’s economy is going to become less resource-based and more services and high-tech oriented during the next decade, say TD Bank economists. The so-called “new economy” sector should emerge from its current slump this year, they say, 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,” says 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.”

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 says 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, when the implementation of free trade agreements with the U.S. and Mexico delivered a powerful dose of support to Canadian producers,” says Burleton.

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.”
-IE Staff