With the world economy being reshaped by the falling value of the U.S. dollar and the rising importance of China, Canadian growth will likely trail that of the United States in 2005, Scotia Economics says in its global outlook report released today.

The Canadian dollar’s climb into the US80¢ to US85¢ range “has dampened exports, production and job creation in the manufacturing sector,” said Warren Jestin, chief economist at Bank of Nova Scotia, in a release.

“The higher exchange rate alongside the runup in oil, gas and other commodity prices also is causing economic momentum to shift from Central to Western Canada. The trend will continue if the currency tests the US90¢ threshold, as we think it will, and energy prices are supported by strong Asian demand.”

As a result, Canadian growth will do well to average 2.5% in 2005, lagging a lukewarm U.S. performance by half a percentage point, the report says.

“Resource-rich B.C. and Alberta will be top performers while our most U.S. focused, manufacturing intensive province — Ontario — will lag as industries adjust to the substantial shift in competitive realities.”

The report says Canada’s trade surplus will be supported by buoyant commodity revenue, but the balance on manufacturing, tourism and other dollar-sensitive areas will continue to erode.

“Even in the resource sector, currency appreciation will restrain profitability.”

The Canadian dollar closed Wednesday at US81.65¢.