Economists predict healthy growth for Canada

Toronto Star, October 8, 2002

Canada's economy will continue to show good growth in 2003 while the United States may produce some pleasant surprises as it chugs slowly toward recovery, economists predicted at a Conference Board of Canada meeting Tuesday.

Uncertainty in the markets over a possible war against Iraq could throw a wrench into the positive forecast, said James Frank, the Conference Board's chief economist, but he remains optimistic. "I believe the U.S. economy is going to surprise people in 2003. Provided that they avoid a shootout with Iraq, I think things could work out quite well."

Sherry Cooper, chief economist for BMO Nesbitt Burns, agrees there will be an acceleration in the U.S. but says it could be offset by a slowdown in spending by consumers burned by the stock market's decline. In a presentation to an international association of shopping centre managers, also in Toronto, Cooper said Canada's economy is the strongest among G7 countries, but spending has been on big-ticket items like housing and autos — both highly sensitive to interest rates.

British Columbia and Central Canada will see the most benefits from increased U.S. demand for pulp and paper and oil, predicted Paul Darby, director of economic forecasting for the Conference Board.

But Alberta should be the biggest earner among the provinces next year, Darby said, thanks to payoffs from investments in oil sands projects. "In Alberta, oilsands mining is really jumping. Annual flow of investment into the oilsands production is over $7 billion every year," Darby said. "It dwarfs everything else going on and with oil prices at $25 a barrel that really keeps Alberta humming along." s a result, housing and construction are also booming, helping to fuel the 4.7 per cent growth forecast for the province for 2003.

Things aren't as rosy in B.C., due in part to government layoffs. But producers of chips for flat-screen computers will do well, Darby said, thanks to a ratcheting up in demand from the U.S. and to some degree in Canada as well.

The comeback in demand for personal computers for the home and office will contribute to growth in Ontario as well. A lot of that equipment, Darby said, was purchased in the lead up to Y2K and is ripe for replacement. In general, exports will be "fairly anemic," Darby said, compared with previous recovery periods. He doesn't expect a quick rebound in telecom investments, "given the oversupply" in the sector.

The good news in Ontario is that the housing market, though it will be somewhat weaker in 2003, will continue to perform well.

While a pickup in construction projects in Atlantic Canada is pushing employment growth, oil and gas mining will ease off in 2003, Darby said. Newfoundland was the biggest earner among the provinces in 2002, thanks to a ramp-up in oil production, but the projects are winding down. Growth for the Atlantic region is expected to be about 3.2 per cent. Quebec may be the only province to buck the growth trend next year. Huge government spending in Quebec led to the creation of 128,000 jobs this year, a record for the province, but much of that was in construction and the work is nearing completion, Darby said.