Commodity rally to drive provincial recoveries

The chorus is growing louder, proclaiming recession ended in the third quarter of 2009. The latest voice in that choir is Scotiabank, where economists are predicting a muted and geographically uneven recovery.

The bank spreads the credit around for ending the economic slump, pointing to consumer spending, government stimulus and a recovery in the credit markets.

“That Canada escaped from the global slump fairly quickly is reflective of our relatively healthy household balance sheets and stable financial system,” said Alex Koustas, economist at Scotia Economics. “However, the modest pace of the recovery highlights the ongoing trade and competitive hurdles that need to be overcome in order to return to stronger growth.”

With economies around the world reawakening, demand for commodities is expected to power the Canadian economy once again. The Western provinces will benefit the greatest from this trend, Koustas says.

“The regional disparity in growth across Canada will continue in 2010 with the Canadian dollar expected to remain strong, while commodity producers benefit from a rebound in global markets,” Koustas said.

Koustas predicts British Columbia will see GDP growth of 3.0%, as Asian commodity demand boosts not only prices, but port activity as well. The province should also see some benefit from the Winter Olympics.

Resurgent demand for oil should drive the overall Alberta economy, which Koustas says will grow by 2.9% in 2010. Next door in Saskatchewan, energy and potash extraction, along with inflows of workers, will drive economic growth to 2.8%.

Manitoba did not suffer as greatly as its neighbours to the west or east in the recession, and should see growth of 2.6% in 2010.

Ontario was one of the hardest hit provinces, as the massive auto sector nearly collapsed. Government supports propped up carmakers, however, and kept autoworkers in their jobs. Economic growth in 2010 should be about 2.7%.

Quebec showed “remarkable resilience” through the recession, according to Koustas, and should see growth of 2.2% in 2010.

The Atlantic provinces weathered the recession better than central and western Canada, and the recovery there will be less pronounced.

New Brunswick is expected post growth of 2.1%, while Nova Scotia will barely edge it out, with 2.2%. Prince Edward Island will see some of the weakest growth, again, thanks to a less-severe recession. The island will see growth of 1.9% in 2010.

Newfoundland & Labrador was the hardest hit of the Atlantic provinces, with its massive exposure to the energy and mining sectors. The global recovery in commodities will set the course of the province, which should see economic growth of of 2.9% in 2010.

(12/23/09)