The provincial economies performed very differently in 2003, indicating that the rising Canadian dollar and other factors such as SARS and mad cow disease are not being felt evenly across the country, says CIBC World Markets in the latest copy of Provincial Forecast.

Warren Lovely, senior economist at CIBC World Markets noted the loss of momentum was particularly felt in factory-intensive Central Canada, where 2003 GDP growth in Ontario and Quebec will likely be half of last year’s robust pace. “In addition to export weakness and a runaway loonie, SARS contributed to the economic slowdown in Central Canada as it did in British Columbia, where the added strain of forest fires also held back growth in the province,” says Lovely.

A robust energy sector and sturdy domestic demand, meanwhile, produced solid growth in Newfoundland & Labrador and Alberta — with the latter overcoming the drag posed by the discovery of a single case of mad cow disease. Saskatchewan should lead all provinces in growth this year, as farm output recovered from drought-ravaged levels.

A reinvigorated U.S. economy has brightened the outlook for 2004, with Canadian economic growth expected to improve. Still, CIBC says the scope of next year’s pick-up will be constrained by firmness in the Canadian dollar, particularly in export-oriented provinces like Ontario, New Brunswick and Quebec, where large factory sectors have been put at a cost disadvantage relative to the U.S.

“The sheer size and speed of the loonie’s ascent creates serious challenges for Canadian manufactures, just as it did in the early 1990s,” says Lovely, noting that back then, factory output and jobs suffered much deeper and more persistent setbacks than those observed in the United States.

Compared with a 2.7% gain for the country as a whole, Alberta is set to lead the country in growth next year. Riding a further pick-up in agricultural production, Saskatchewan is expected to enjoy another year of sturdy growth, while above average GDP growth is foreseen for British Columbia, Newfoundland & Labrador and Nova Scotia in the year ahead.

A full copy of Provincial Forecast is available at: http://research.cibcwm.com/res/Eco/EcoResearch.html.