OTTAWA, March 8, 2016 /CNW/ - Ontario's economy is well positioned to advance by an estimated 2.4 per cent this year, just behind British Columbia, according to The Conference Board of Canada's Provincial Outlook: Winter 2016.
"Ontario's economy grew at an average pace of close to 2.5 per cent over the last two years, and the outlook remains positive over the next two," said Marie-Christine Bernard, Associate Director, Provincial Forecasting. "The lower Canadian dollar and stronger growth in U.S. consumer demand will help boost the province's exports."
- The province's real GDP is expected to increase by 2.4 per cent in 2016.
- Exports are expected to rise thanks to the lower Canadian dollar and strong U.S. consumer demand.
- Infrastructure spending will also continue to grow, further helping to offset the slowdown in consumer spending.
- Only four provinces are expected to see their economy grow by more than 2 per cent this year: British Columbia, Ontario, Manitoba, and Nova Scotia.
The province's exports will be a key driver of growth for the next two years. Strong demand from the United States tends to help Ontario exports. Moreover, the Canadian dollar is weak relative to its U.S. counterpart in 2016, making goods purchased in Ontario relatively cheaper for U.S. producers. International exports are forecast to grow by 4.7 per in 2016, due largely to increased trade with the United States.
Business investment is also expected to pick up this year. Residential investment, which comprises a significant portion of business investment in Ontario, will increase by 5.1 per cent in 2016. Residential investment surged in 2015 as homebuyers rushed to avoid the federal government's new mortgage regulations and take advantage of still low mortgage rates. In addition, sustained export growth will encourage investment in machinery and equipment to help boost manufacturing capacity.
Government spending will weigh on economic growth over the next two years, as the provincial government continues to hold back program spending in an effort to balance its budget on schedule by 2017-2018. The Ontario government projects a deficit of $4.3 billion for 2016-17, before balancing the books as promised in 2017-18. According to the Conference Board's Ontario Budget Analysis: February 25, 2016, over the next two years, program spending is projected to barely grow, rising by just over 1 per cent. This levelling off of spending will be achieved through ambitious targets for such major areas as health care and education, as well as through sizable cuts to other program spending. Health spending, in particular, is slated to grow by an average annual rate of 1.8 per cent from 2015-18. Given increasing health care demand from the province's aging population, meeting this aggressive target will be a challenge.
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SOURCE Conference Board of Canada
Image with caption: "Real GDP by province in 2016 (CNW Group/Conference Board of Canada)". Image available at: http://photos.newswire.ca/images/download/20160308_C4450_PHOTO_EN_637334.jpg
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