TORONTO - Canada's economy is poised for an upswing over the next five years, according to a report released by the Bank of Montreal predicting 3.3-per-cent growth this year, followed by 4.5 per cent in 2003 and 3.5 per cent in 2005-06.

Short-term interest rates are expected by forecasters to rise by 2.75 per cent by the end of next year and the Canadian dollar to stand at US 72.5 cents by 2006, says Canadian Regional Outlook.

Almost every province will experience more growth than last year, with Newfoundland leading the way because of a big increase in resource sector output. The exception will be Alberta, which will experience a decline this year, due to a drop in oil and gas capital spending.

Ontario is expected to experience an early boom in 2003, with 5.1-per-cent growth expected, due to a strong rebound in the manufacturing sector. All other provinces are expected to reach at least 3 per cent by the end of next year.

"Some segments of the economy -- and I'm thinking particularly of the high-tech segments of manufacturing -- will take a little longer to join the recovery," says Tim O'Neill, chief economist of Bank of Montreal. "In the meantime, the low Canadian dollar and still low interest rates will be key drivers behind the rebound in exports and domestic spending."

Provinces with faster population growth, such as Alberta and Ontario, are likely to experience more economic growth in 2003-04 than their stagnant counterparts. Newfoundland, whose population has been in decline, is the one exception.

Employment is also expected to increase. Manitoba, Saskatchewan and Alberta are all expected to have unemployment rates close to five per cent by 2006 and, at six per cent, Ontario will also drop below the national average of seven per cent.

These regional predictions reflect projections for the U.S. economy, to which Canadian growth is closely tied. The U.S. economy is expected to grow by 3.3 per cent this year and 4.3 per cent in 2003, followed by 3.5 per cent throughout 2004-06. Bank of Montreal economists expect Canada’s economic growth to slightly exceed that of the U.S. the in the same five years.

Canadian Regional Outlook report is published three times a year, in the spring, summer and fall. For a full copy of the report, visit www.bmo.com/economic.

 

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