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Western provinces driving economic growth

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CALGARY -- Canada's economic growth is being driven by resource-rich western provinces -- including Manitoba -- according to a Bank of Montreal report released Tuesday.

BMO is forecasting GDP (gross domestic product) growth in Manitoba exceeding the national average this year and next with a strong rebound from the agricultural sector leading the charge. The bank is pegging growth in 2012 at 2.6 per cent in Manitoba compared to a national rate of 2.2 per cent.

It would make Manitoba's growth rate this year third fastest behind only Alberta and Saskatchewan and a marked step up from the 1.1 per cent growth last year. Next year, it's predicting 2.3 per cent in Manitoba and 2.0 in Canada. Those metrics would make Manitoba the fifth fastest growing province.

BMO is more cautious than RBC, whose forecast came out last month calling for 3.3 per cent growth in Manitoba's GDP in 2012 and another 3.2 per cent increase in 2013.

Although there's quite a spread, RBC is by far the most bullish of all the private sector forecasters when it comes to Manitoba.

In addition to the increase in agricultural output, BMO notes manufacturing continues to recover from the recession, with shipments of machinery and transportation equipment seeing solid growth in recent months.

And even though it's a small share of overall economic output, real oil and gas output rose at a near-18 per cent annualized rate over the past seven years, the fastest pace of any province.

Alberta leads the pack, with the bank predicting 3.5 per cent real GDP growth this year, falling back a bit to 2.9 per cent in 2013.

"The energy sector remains the key driver of economic activity in the province, with crude bitumen production up 16 per cent year-over-year through the first half of the year, and the Energy Resources Conservation Board expecting oilsands output to more than double by 2021," said economist Robert Kavcic.

The energy sector's strength has attracted workers to Alberta, which has the country's lowest unemployment rate at 4.4 per cent.

But BMO Kavcic says the industry faces some risk.

"Cost pressures could again pick up, though oilsands operations are generally viewed as economical at prices above US$80 (per barrel)," he said.

"Also, wrangling over new pipeline capacity continues."

Production from the Bakken, a massive oil deposit that stretches through parts of Montana, North Dakota and Saskatchewan, is filling up existing pipelines and causing Canadian producers to get a lower price for the heavy crude they produce.

"Estimates suggest that production in Western Canada could be negatively impacted by 2015/16 if there is not enough new pipeline capacity put in place."

BMO says Canada's overall real GDP growth is expected to be 2.2 per cent in 2012, with the western provinces all topping that rate.

Saskatchewan, where oil and gas extraction and potash and uranium mining are big economic drivers, is expected to see growth of 3.1 per cent this year. For British Columbia, it sees real GDP growth of 2.5 per cent and for Manitoba, growth of 2.6 per cent.

Further east it's a different story. BMO sees Ontario posting growth of two per cent and the economies of Quebec and the Atlantic provinces growing at less than two per cent in 2012.

 

-- The Canadian Press, with files from Martin Cash

Republished from the Winnipeg Free Press print edition October 10, 2012 B5

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