West expected to lead in growth
Oil, housing at forefront
Canada’s three most westerly provinces will lead the country in real GDP growth this year as a result of increasing oil production and rising housing prices, the Conference Board of Canada predicts.
The Conference Board released growth forecasts for each province Monday, which showed that Alberta’s economy will grow 3.3 per cent next year — the highest growth rate in the country — followed by 2.5 per cent real GDP growth in both Saskatchewan and British Columbia.
While a rebound in the energy sector was the main reason for growth in Alberta and Saskatchewan, B.C.’s economic growth would come primarily from demand for housing, Marie-Christine Bernard, economist at Conference Board, said in an interview.
Measures to cool the housing market in B.C. were successful for a time but the sector seems to have turned a corner and, even at 2.5 per cent growth, Bernard said, “we might be a little on the low side for growth.”
Giovanni Gallipoli, associate professor of economics at the University of British Columbia, agreed with Bernard’s assessment that housing demand is driving growth on the West Coast.
“If it wasn’t for housing right now, we’d be talking about lacklustre growth. It’s not obvious to me that this is a stable model for growth,” Gallipoli said.
More durable growth comes from enduring productivity gains in industrial and other sectors, not in “demand spurts” in sectors like real estate, he said.
A booming real estate sector is also one of the three main drivers of Canada’s national 2.3 per cent real GDP growth forecast this year, Bernard said.
The other two factors are federal stimulus spending and a rebound in the energy sector.
In Alberta and Saskatchewan, both emerging from brutal recessions caused by the collapse in oil prices, Bernard expects an uptick in drilling activity and oil production to boost growth.
“I think it’s the beginning of the recovery but I think it will take more time before we see people benefiting in terms of ... job creation,” Bernard said.