Atlantic Canada weathered economic recession well: CIBC World Markets Inc.

Growth prospects for 2010 and 2011 vary across region

TORONTO, Jan. 28 /CNW/ - While weak energy and mineral demand hurt Newfoundland and Labrador the rest of Atlantic Canada outperformed the national economy in 2009, a trend likely to reverse in the next two years, finds a new report from CIBC World Markets Inc.

"Output in Newfoundland & Labrador slumped in 2009, as energy and mineral production declined," says Warren Lovely, senior economist in CIBC's latest Economic Insights report. "Confidence remains high, however, with consumer spending and business investment expected to lend meaningful support in the years ahead. Once a labour dispute is resolved, nickel production is poised to shoot higher, with a strong price backdrop supportive. Barring disruptions, growth in 2011 should strengthen further, with large energy projects having the potential to deliver strong growth longer-term."

The other Atlantic provinces suffered a less severe economic hit during 2009. Consumer fundamentals are in relatively better shape than the rest of the country but with a leaner roster of major capital projects, growth in much of the region is likely to trail the national average in 2010-11.

"Tax cuts and lower power rates will make New Brunswick a more attractive destination for industry," adds Mr. Lovely. "Less positively, traditional sectors like forestry and business services face headwinds. And in some cases, capital investment has been put off. For Nova Scotia, first gas from Deep Panuke will flow in 2010, helping to offset depletion in more mature fields. The province boasts a vibrant finance industry and its transportation sector stands to benefit from an upturn in global demand. Prince Edward Island will see a limited bounce in 2010, and despite diversifying its economy, the agriculture sector has been under stress.

Mr. Lovely expects GDP growth in Newfoundland & Labrador to climb 2.6 per cent in 2010 and 3.3 per cent in 2011. In the rest of Atlantic Canada, growth will range from 1.8 to 2.2 per cent in 2010 and between 2.4 and 2.8 per cent in 2011.

The report finds that the economic recovery will not be even across the country. On the back of strong oil, potash, agriculture and uranium sectors, Saskatchewan is expected to lead economic growth in the country in 2010 with GDP up 3.0 per cent. Solid job prospects will continue to spur in-migration, with population growth stronger than at any time in the past 30 years.

The B.C. economy will be the second strongest in 2010 with 2.8 per cent growth on the basis of strength in the resource sector. The province will also see a broadening and deepening of its export base, with expanded transportation infrastructure allowing the province to lever its Gateway to Asia status. Mr. Lovely does not see the end of Olympics spending as a significant drag and notes that the adoption of a harmonized sales tax should boost investment and spur productivity growth.

A newfound availability of cost-effective inputs, alongside a recovery in commodity prices, is sparking re-investment in Alberta. But a still-tentative consumer suggests that the province will be slower to re-accelerate in 2010 seeing GDP growth at 2.4 per cent for the year. However, by 2011 growth is expected to reach 4.2 per cent, tops in the country, just ahead of Saskatchewan.

In badly hit Ontario, inventory restocking will see GDP growth in 2010 beat the national average for the first time since the Canadian dollar began its appreciation in earnest. That resurgence may be temporary, however, as an overvalued Canadian dollar and a reversion to slower U.S. growth is likely to weigh on the economy. A harmonized sales tax, alongside cuts to corporate taxes, will boost competitiveness and help lure jobs. A focus on emerging sectors, such as green power, also looks to pay dividends. Growth in Canada's banking sector also stands to benefit Ontario disproportionately.

Manitoba escaped the recession relatively unscathed, tabling a fourth straight year of above-average growth in 2009. With less ground to be made up, growth should run just in line with the national average in 2010 at 2.3 per cent, climbing to 3.1 per cent in 2011.

Recent outperformance in Quebec likely won't be repeated, with solid, if unspectacular gains due in 2010-11.

Real GDP Performance

                                                CIBC Forecasts
    Y/Y %              Actual    --------------------------------------------
                        2008          2009           2010           2011
    BC                   0.0          -2.2            2.8            3.4
    Alta                 0.0          -2.6            2.4            4.2
    Sask                 4.2          -1.7            3.0            4.1
    Man                  2.0          -0.2            2.3            3.1
    Ont                 -0.5          -3.5            2.4            2.8
    Qué                  1.0          -1.4            2.2            2.7
    NB                   0.0          -0.7            2.2            2.8
    NS                   2.2          -0.4            2.1            2.6
    PEI                  0.5          -0.5            1.8            2.4
    N&L                  0.5          -3.5            2.6            3.3
    CDA                  0.4          -2.5            2.3            3.0
    U.S.                 0.4          -2.5            2.8            2.4
    Source: CIBC, Statistics Canada

The complete CIBC World Markets report is available at:

CIBC's wholesale banking business provides a range of integrated credit and capital markets products, investment banking, and merchant banking to clients in key financial markets in North America and around the world. We provide innovative capital solutions and advisory expertise across a wide range of industries as well as top-ranked research for our corporate, government and institutional clients.

SOURCE CIBC World Markets

For further information: For further information: Warren Lovely, Senior Economist, CIBC World Markets Inc. at (416) 594-8041,, or Kevin Dove, Communications and Public Affairs at (416) 980-8835,

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