July 30, 2009 / 5:43 PM / 8 years ago

Forecasts see Canada provincial economies mending

TORONTO (Reuters) - The economies of all 10 of Canada’s provinces will bounce back from recession next year, forecasters said on Thursday, but the view for the remainder of 2009 is mixed with the Conference Board of Canada seeing the former high-flying province of Saskatchewan falling hard.

The Conference Board said in its summer provincial outlook that its expects four provinces -- Manitoba, New Brunswick, Nova Scotia and Prince Edward Island -- to avoid recession completely in 2009.

But it revised its outlook for Saskatchewan, which earlier this year looked set to be the star provincial performer, sharply lower.

It now sees that province’s economy shrinking 2.7 percent in 2009, compared with its spring forecast of 0.2 percent growth, because of a drought hitting major crops and weak global demand for potash, a key fertilizer ingredient that is one of Saskatchewan’s major exports.

“What a difference a few months can make,” the Conference Board said. “Major potash production cuts and uncertainty in the agriculture sector have dimmed the outlook considerably.”

Economists at Bank of Nova Scotia, however, saw the future differently and said that all provinces except Saskatchewan will have contracting economies this year.

Scotiabank also cited potash and low precipitation rates as drags on growth in Saskatchewan, but forecast the province would eke out growth of 0.6 percent this year. Earlier this year, the bank had said Saskatchewan will likely post no growth this year.

Both the Conference Board and Scotiabank expect Saskatchewan will have country-leading growth in 2010. The Conference Board forecast 3.5 percent growth and Scotiabank 3 percent.

The Conference Board said Ontario, the country’s manufacturing heartland, will suffer 3 percent contraction this year and the bulk of the country’s job losses due largely to the troubles of the automotive industry.

But strengthening global demand and ongoing restructuring in key industries should allow Ontario to bounce back next year with 3.1 percent growth, the Conference Board said.

Scotiabank said Ontario will have 2.2 percent growth in 2010, partially reversing a 2.8 percent retrenchment this year.

One of the weakest performers in both forecasts was Newfoundland and Labrador, which is battling production slowdowns in the oil industry, a key contributor to the economy of the country’s easternmost province. But it too should rebound next year.

All the provinces should recover next year, both forecasts said, with Canada as a whole showing solid growth in the second half of 2009 but not enough to overcome the contraction of the first half.

“By many indicators, the current quarter will likely mark the end of the Canadian recession,” said Alex Koustas, an economist at Scotiabank.

Scotiabank forecast output to contract by an average of 2.2 percent in 2009, but post a 2.5 percent average gain in 2010. The Conference Board said real GDP will still shrink by 1.9 percent overall this year, but recover with growth of 2.7 percent next year.

Reporting by Ka Yan Ng; editing by Peter Galloway

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