La belle province was a bright economic light in Canada last year – and there’s no indication the lustre will fade anytime soon.

“Quebec has been a very pleasant surprise in 2017,” says Robert Hogue, senior economist with Royal Bank of Canada (RBC) in Toronto. “We anticipate the strongest growth in 15 years [will be reported when numbers are final].”

RBC estimates that Quebec’s economy experienced real gross domestic product (GDP) growth of 2.8% in 2017. Growth is expected to slow slightly to 1.8% this year.

Toronto-based Bank of Montreal‘s capital markets division predicts Quebec will have real GDP growth of 2.1% this year, down from 2.9% growth in 2017 and almost on par with the 2.2% growth rate projected for the country as a whole in 2018.

In December, Quebec’s unemployment rate fell below 5% – “something I never thought I’d see in my lifetime,” says Hogue. This low rate effectively means Quebec now is at “full” employment, a milestone that has both advantages and disadvantages.

“For a person already in Quebec and looking for work, the scenario is great,” says Stephen Spence, economist with the Conference Board of Canada’s provincial outlook group in Ottawa. “[However,] low unemployment also means finding workers is becoming harder for businesses. This will become a more serious and frequent problem.”

If the unemployment rate remains low, as anticipated, businesses could be deterred from opening offices or expanding into the province.

Manufacturing and construction have been strong economic drivers for Quebec. According to a recent provincial economic forecast from Toronto-Dominion Bank (TD), manufacturing gains have been widespread across industries – and new-home construction in 2017 is likely to hit a five-year high.

Greater Montreal has been particularly strong in these industries. The region’s goods-producing industry is expected to post growth in 2017 for the first time since 2012, and housing construction should post growth of 3.1% in 2017 before moderating to 2.1% in 2018, according to the Conference Board.

There may be a hiccup in housing starts, however. Stiffer rules for mortgage lending, coupled with anticipated increases in interest rates, could dampen the market for new homes.

“We expect both home resale and construction activity to ease in 2018,” states a recent report from RBC. “This is, in fact, one of the main factors contributing to slower economic growth in our forecast for the coming year in Quebec.”

Manufacturing is expected to post growth of 4.7% in 2017, largely on the back of Montreal-based Bombardier Inc., says Spence.

In October, Airbus SE announced it would acquire a majority stake in Bombardier’s C Series Aircraft LP. Through that partnership, the companies expect to manufacture more than 6,000 aircraft over the next 20 years.

The partnership’s headquarters and primary assembly line will remain in Quebec, while Airbus will undertake additional C Series production at its manufacturing site in Alabama.

This U.S. presence may serve as a compelling counter-argument to Chicago-based Boeing Co.’s complaint that Bombardier received illegal government subsidies. In the wake of that complaint, the U.S. Department of Commerce levied a 220% countervailing duty on Bombardier’s sale of commercial jets to one U.S. airline.

Major projects also will contribute to the Quebec economy over the next several years. The light rail project in Montreal alone is expected to cost $6 billion – money that will be spent over the next three years on the 67-kilometre rail line.

Quebec’s Liberal government has received high praise for its fiscal restraint and budget tightening over the past several years. Late last year, Finance Minister Carlos Leitão announced that as a result of “sound management of public finances,” the province had a budget surplus of $2.4 billion. Half of that surplus will be used to lower income taxes for residents.

The government also announced that it will spend $367 million to step up deployment of high-performance digital infrastructure in all regions of the province. This move will provide more than 90% of Quebecers with ultra-high-speed Internet within five years.

The economic strength shown in 2017 and the solid, if less robust economic performance expected for 2018 has boosted optimism.

“The momentum is there,” says Hogue. “Confidence is back, and confidence does wonders for the economy.”

Confidence, however, can be a fickle emotion, Hogue warns: “It wouldn’t take much to dampen that mood.”

However, Hogue leans toward the positive side. “[Quebec’s economy] is not a house of cards,” he says. “It is quite solid.”

Two other challenges also must be addressed. The North American Free Trade Agreement is being renegotiated, and if the U.S. pulls out or pulls back significantly, Quebec will feel the impact.

For example, American negotiators expressed intent to eliminate the system that controls prices and quantity in the dairy industry, which will have a direct economic effect on Quebec.

As well, Canada’s general demographic trend toward an aging population will present a challenge for Quebec, particularly because the province has not been successful in attracting immigrants.

“[Quebec] attracts only about 18% of immigrants to the country,” Spence notes, “but has 23% of the population nationally.”