U.S. recovery to pull Ontario economy out of its doldrums: think-tank

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The logo of The Conference Board of Canada is shown. THE CANADIAN PRESS/HO

OTTAWA - Ontario's fragile economy is hanging in against a double-barrel dose of austerity from the federal and provincial governments and may be poised for a modest rebound, the Conference Board said Monday.

The Ottawa-based think-tank's provincial outlook has the resource-rich western provinces, particularly Alberta and Saskatchewan, continuing to lead the country in growth this year and through 2014.

But it also has some welcome news for Canada's most populous province. It projects Ontario will rebound from weak economic growth of 1.8 per cent this year to 2.1 per cent in 2013 and 2.6 per cent the year after as the U.S. economy regains strength.

"The recovery in the U.S., although slow, will help boost Ontario's exports, which are forecast to grow 4.5 per cent in 2013 and 4.4 per cent in 2014," the report states.

"The brisk growth in the auto and parts sector will boost manufacturing, which is expected to advance at an average annual pace of 3.4 per cent form 2012 to 2014."

The report notes that with both Ottawa and the Ontario government slashing public sector jobs in an effort to rein in deficits, growth has been restrained this year. Public sector weakness means the province will need to rely on the business sector and exports to sustain the economy next year as well, it said.

The export recovery is also expected to boost Quebec, which has been even more acutely impacted by soft global demand.

As such, the think-tank anticipates growth in Canada's second most populous province will pick up from an anemic 0.9 per cent this year to 1.6 per cent in 2013 and 2.1 per cent in 2014.

In a previously released report, the Conference Board forecast the Canadian economy would grow 1.8 per cent this year and by 2.3 in 2013 and 2.6 in 2014.

The soft 2012 number — 0.4 percentage points below the official Bank of Canada forecast — suggests the think-tank believes the country is currently in a soft patch that will last the rest of the year.

It sees the average unemployment rate in Canada holding steady at 7.3 per cent in 2013, but says it will fall below seven per cent for the first time in seven years in 2014.

"Canada's economy is muddling through the second half of 2012 and into 2013. The weakness has been relatively broad based across industries as the struggles of the global economy have hit home," explained Marie-Christine Bernard of the Conference Board.

She said most of the provinces are feeling the impact of lower commodity prices.

But resource development continues to fuel economic expansion in Alberta and Saskatchewan and will do so going forward.

The two provinces are expected to generate three and three-plus percentage growth rates in each of 2012, 2013 and 2014 — the only provinces to hit the mark.

The report estimates British Columbia's output is expected to grow by 1.8 per cent this year, and 2.7 and 2.6 in subsequent years. Manitoba's growth rates for the three years are estimated at 2.5, 2.1 and 2.3.

Along from Quebec, the weakest growth will be in the Atlantic provinces, the Conference Board said.

Newfoundland will see its economy shrink by 0.7 per cent this year due to a downturn in the resource sector, bounce back to 2.7 per cent growth in 2013 as oil production rebounds and then fall back to 0.7 per cent growth in 2014.

Meanwhile, the three Maritime provinces will also experience tepid growth in the three years covered by the report — Prince Edward Island (1.1, 1.7. 1.6); Nova Scotia (0.6, 1.8, 1.5) and New Brunswick (0.5, 1.8, 2.1).