Having suffered the most from a period of relatively high interest rates, Ontario is poised to lead the recovery as rates ease, says CIBC World Markets Inc.
In a new report, CIBC economists said that the recovery in the Canadian economy will not be uniform. In particular, provinces that have seen their housing markets and consumer spending crimped by high rates are set to lead the way back.
“As interest rates come down and labour market slack is absorbed, there is plenty of room for growth to accelerate across the country,” the report said.
“That room is most obvious in Ontario where per-capita spending and housing activity has been weakest, and labour-market slack has built up more than in other areas,” it said.
Indeed, the report forecasts that Ontario will lead the country in GDP growth by 2026, with an estimated 3.0% annual gain — trailed closely by Alberta and British Columbia at 2.9% and 2.8%, respectively.
“Alberta, where labour-market slack has been greatest, and B.C., where consumer spending and housing activity have more room to build, should also see solid growth,” the report said.
Conversely, Atlantic Canada will likely see a weaker rebound and potentially below-average growth by 2026.
“This is largely a product of their own success, as these provinces have seen less build up of slack, but partly also a reflection of the expected slowdown in immigration ahead,” it said.
“While lower interest rates should benefit all provinces, some will benefit more than others,” it concluded.