Canada’s GDP fortunes looking up for 2017

It’s hard to ignore the contrasting fortunes that face Canadian provinces in the year ahead, even though the overall outlook for the country is expected to produce consistent — but moderate — growth in 2017.

Economic reports from the Bank of Montreal and Canadian Imperial Bank of Commerce, released Thursday, examine where and why growth will continue in the coming months, and what regions are expected to underperform.

“Canada’s regional economic landscape continues to vary greatly, with tremendous churning below a relatively calm national surface,” Douglas Porter, chief economist at BMO Capital Markets, said in the bank’s forecast.

After climbing out of a secondquarter downturn this year, largely caused by the impact of low energy prices on resources-dependent provinces — along with wildfires in the heart of Alberta’s oilpatch — the country as a whole is forecast to post a gain of as much as two per cent in 2017, following what economists estimate will be growth of 1.2 per cent this year.

“(But) notable is the fact that the regional economic growth drivers of the past decade have receded to the back of the pack, while past laggards move into a leadership role,” Porter said.

In particular, Alberta’s collapse as a growth engine in Canada to the depths of recession has been dramatic. The global oil-price plunge cut economic output in the province from 5.1 per cent in 2014 to minus four per cent in 2015.

BMO’s outlook is for a 2.3-percent contraction in Alberta this year, followed by a 2.3-per-cent recovery in 2017 if the price of oil — trading above US$50 a barrel on Thursday, from below US$40 at the end of 2015 — continues its mild recovery and investments begin to return.

“The fall of oil and gas prices clearly represents the biggest story for energy-producing provinces like Alberta, Saskatchewan and Newfoundland and Labrador,” said Andrew Irvine, the head of BMO’s Canadian commercial banking division.

Meanwhile, in the historic engine of the Canadian economy — Ontario — most forecasters agree that growth will come in around 2.5 per cent this year, and between 2.2 and 2.3 per cent in 2017.

“The auto sector, for example, is running near full capacity, but marginal new investment that would drive stronger GDP growth is increasingly flowing to lower-cost jurisdictions in the southern U.S. and Mexico,” BMO’s Porter noted.