OTTAWA, Dec. 7, 2015 /CNW/ - As we head into 2016, exports and business investment will help Ontario's economy advance by an estimated 2.3 per cent next year and another 2.1 per cent in 2017, according to The Conference Board of Canada's latest Provincial Outlook.
"Household spending has kept Ontario's economy ticking this year. Over the next two years, however, household consumption growth is expected to slow, reduced by rising consumer prices and the potential introduction of the proposed Ontario Pension Plan in 2017," said Marie-Christine Bernard, Associate Director, Provincial Forecast. "Fortunately, international demand is expected to pick up the slack and keep Ontario's economy expanding over the next two years."
- As one of the main drivers of economic growth, exports are expected to grow by 4.3 per cent in 2016 and 3.9 per cent in 2017.
- In 2017, business investment will pick up in response to improving international demand for Ontario's goods and services.
- The province's real GDP is expected to increase by 2.3 per cent in 2016, followed by 2.1 per cent growth in 2017.
Most of the anticipated growth will come from exports of metal products and industrial machinery, equipment, and parts, which are projected to increase by more than 6 per cent over the next two years, supported by increased business investment in the United States. At the same time, exports of manufactured consumer goods will benefit from a weak Canadian dollar and strong household consumption south of the border. Overall, exports of goods and services are projected to grow by 4.3 per cent in 2016 and 3.9 per cent in 2017.
Business investment is expected to accelerate in line with rising exports. After growing by an estimated 0.5 per cent in 2015, business investment will increase to 2.4 per cent next year and 5.9 per cent in 2017.
Services exports and tourism will also benefit from a growing U.S. economy and a weaker currency. Exports of commercial services such as financial, telecommunications, and consulting are projected to see strong growth over the next two years. Moreover, tourism is experiencing its strongest boom in over a decade, following a long period of decline.
While household spending was the main driver of Ontario's economic growth this year, household consumption was driven primarily by temporary factors. Household consumption growth is expected to slow over the next two years, falling to 2.5 per cent in 2016 and 1.3 per cent in 2017. Also next year, the depreciation of the Canadian dollar will raise consumer prices, reducing the purchasing power of Ontarians. Moreover, the Ontario Retirement Pension Plan (ORPP), if introduced as planned, is expected to eventually reduce the disposable income of approximately 3.4 million Ontario employees, which could hinder household consumption growth over the near term.
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SOURCE Conference Board of Canada
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