Expectations of a recession in 2023 are looming as economic growth slows amid rising inflation and interest rates. But the full fallout for the provinces will probably vary, suggested a BMO report on Thursday.
Factors affecting provincial growth forecasts include how resource-rich a particular province is, whether it benefits from oil prices, and its population growth and level of residential investment.
Real estate will play “a significant role” in the downturn for some provinces, said BMO chief economist Douglas Porter in the report. “In British Columbia, residential investment carries the highest weight in real GDP in the country.”
While residential investment in Ontario is proportionally lower, that province’s downturn in real estate will be “the sharpest in the country,” Porter said, a theme already playing out in resale activity and prices. “Slower new construction and renovation activity don’t look far behind.”
High oil prices and slowing U.S. demand will hit central Canada “relatively hard,” he said, though the weaker loonie is a buffer for exports and manufacturing.
BMO’s growth forecast for Ontario was the weakest among the provinces, at -0.4% real GDP growth in 2023, followed by -0.3% for B.C.
More resilient provinces will likely include those in Western Canada. Oil prices continue to support the economy, incomes and government revenues in Alberta and Saskatchewan, Porter said.
Alberta had the highest growth forecast, at 1.4%, and Saskatchewan was fourth with a forecast of 1.0%.
The second and third spots went to Atlantic Canada, where growth should be buoyed by strong population flows and rebuilding post-Hurricane Fiona, Porter said.
P.E.I.’s growth forecast of 1.3% was second only to Alberta, and Newfoundland and Labrador’s was forecast to grow at 1.2%.
For full details by province, read the BMO report.