CALGARY – Canada’s economic growth is being driven by resource-rich Western provinces, according to a Bank of Montreal report released Tuesday.
Alberta leads the pack, with the bank predicting 3.5 per cent real GDP growth this year, falling back a bit to 2.9 per cent in 2013.
“The energy sector remains the key driver of economic activity in the province, with crude bitumen production up 16 per cent year-over-year through the first half of the year, and the Energy Resources Conservation Board expecting oilsands output to more than double by 2021,” said economist Robert Kavcic.
The energy sector’s strength has attracted workers from elsewhere in Canada to Alberta, which has the country’s lowest unemployment rate at 4.4 per cent.
But BMO Kavcic says the industry faces some risk.
“Cost pressures could again pick up, though oilsands operations are generally viewed as economical at prices above US$80 (per barrel),” he said.
“Also, wrangling over new pipeline capacity continues.”
Production from the Bakken, a massive oil deposit that stretches through parts of Montana, North Dakota and Saskatchewan, is filling up existing pipelines and causing Canadian producers to get a lower price for the heavy crude they produce.
“Estimates suggest that production in Western Canada could be negatively impacted by 2015/16 if there is not enough new pipeline capacity put in place.”
BMO says Canada’s overall real GDP growth is expected to be 2.2 per cent in 2012, with the Western provinces all topping that rate.
Saskatchewan, where oil and gas extraction and potash and uranium mining are big economic drivers, is expected to see growth of 3.1 per cent this year.
For British Columbia, it sees real GDP growth of 2.5 per cent and for Manitoba, growth of 2.6 per cent.
Further east it’s a different story. BMO sees Ontario posting growth of two per cent and the economies of Quebec and the Atlantic provinces growing at less than two per cent in 2012.
The report says fiscal restraint, the high loonie and sluggish U.S. demand are putting a damper on growth in Central Canada.
Kavcic noted some cause for optimism in Ontario’s auto sector.
“Auto producers continue to invest in North America and, despite a strong currency and higher labour costs compared to the southern U.S. and Mexico, Ontario is no exception,” he said.
“Toyota, for example, is expanding production at its Woodstock assembly plant — a project worth about $100 million and 400 jobs. Plus, the CAW and Big Three automakers recently reached new four-year contract agreements. Output in the auto sector was up a solid 20 per cent year-over-year through August.”
Also Tuesday, the International Monetary Fund trimmed its global growth forecasts in its quarterly economic outlook.
The IMF predicts the global economy will expand 3.3 per cent this year, down from the estimate of 3.5 per cent growth it issued in July. Its forecast for growth in 2013 is 3.6 per cent, down from 3.9 per cent three months ago and 4.1 per cent in April.