Sluggish export growth will hinder economic prospects in Ontario and Quebec in 2005, while western provinces will continue to benefit from still-high commodity prices and strong demand for primary resources, the Conference Board of Canada forecast yesterday.

“The high-flying loonie is affecting the competitiveness of export- oriented manufacturers, which are concentrated in Ontario and Quebec,” said Marie-Christine Bernard, associate director, Provincial Outlook.

The outlook in central Canada illustrates “a tale of two economies”, the Conference Board says. While the domestic economy remains healthy, the trade sector is hampered by the strong currency and softening U.S. demand for automobiles and new housing.

In both provinces, real gross domestic product is expected to grow, at market prices, by 2.3% in 2005, followed by increases of 2.8% in 2006.

Alberta is expected to post real GDP growth, at basic prices, of 3.8% in 2005, topping all the provinces for the second consecutive year. The Conference Board predicts construction activity will soar, led by several multi-billion oilsands developments and robust drilling intentions. Economic gains in Alberta will moderate to 3% next year, second only to Newfoundland and Labrador.

Favourable prospects in the agriculture, mining and manufacturing sectors will lead Saskatchewan to overall real GDP growth of 3.4% in 2005, and the economy will expand by 2.3% in 2006.

With healthy consumer demand and a sound fiscal outlook, the B.C. economy is expected to grow by 2.7% in 2005.

Manitoba’s economy will also cool off in 2005, but it will still expand by 2.7%.
Major construction projects and their spinoff effects will lift New Brunswick’s economy by 2.5% in 2005. But the provincial economy will post the slowest provincial growth in 2006 at 2%.

Nova Scotia’s real GDP growth will average 2.3% over 2005-06, helped by gains in the service industries.

Newfoundland and Labrador will benefit from stronger oil production in 2005. When production at the White Rose field reaches its full stride toward the end of 2006, real GDP growth of 3.1% is projected for next year, the highest in Canada.

GDP growth in Prince Edward Island is forecast to be less than 2% per year in 2005 and 2006.