After avoiding a fall into recession last year, Manitoba is poised to be near the head of the class in Canada in 2011.

Just how strong Manitoba’s economy will be depends on whom you talk to, with experts estimating real gross domestic product growth ranging from 2.5% to 3.5%. The outlook is similarly bullish for 2012, with forecasts calling for growth in the 2.5%-3.2% range.

Any of those numbers would represent a significant improvement over 2010, when the province posted real GDP growth of 1.8%. That figure would have been considerably higher if the agriculture sector hadn’t been hit with one of the wettest summers on record, effectively drowning the growing season in many areas.

Assuming precipitation levels return to anything close to normal this year, says Paul Ferley, Royal Bank of Canada’s assistant chief economist in Toronto, the agricultural sector should provide a significant boost to Manitoba’s economic performance.

The province’s manufacturing sector is expected to pull more than its weight, too, he adds, with a forecast of 6% growth this year. RBC economists are the most bullish about Manitoba’s prospects, predicting a 3.5% increase in real GDP for 2011.

Says Ferley: “We’ve assumed with the recovery in the U.S. and globally that we’d start seeing strengthening manufacturing activity. We did, to some extent, see it in 2010. It was a lessening of the declines that were more pronounced in 2009.”

An economic recovery south of the border is key for Manitoba because such a large portion of the province’s output is destined for the U.S. Ferley says he’s confident that aggressive action by U.S. policy-makers and increased liquidity provided by the U.S. Federal Reserve Board will keep the expansion on track. It is not, however, a risk-free prognosis.

“It was a severe recession that caused lots of damage to household balance sheets [in the U.S.],” says Ferley. “The financial system, although improved, isn’t back to where it was. The global economy is still [susceptible] to negative shocks, such as major military conflicts, which could sink confidence and push the U.S. and global economy back into recession.”

Robert Kavcic, an economist with Bank of Montreal in Toronto, says Manitoba should be able to rely on broad-based strength in 2011 as commodities, housing and consumer spending are expected to post positive growth.

Above-average population growth is poised to play a positive role as well, he adds. Net migration for the 12 months ended Sept. 30, 2010, was 13,200, representing the fastest rate of population growth in Manitoba since the early 1980s. Many of the new arrivals came via the provincial nominee program, an initiative that seeks to fill job shortages with skilled workers from around the globe.

“Population growth drives consumer spending,” Kavcic says. “The spinoff is you need to build more houses, so it creates jobs in the construction sector. It looks like it’s going to continue, too.”

John McCallum, finance professor at the I.H. Asper School of Business at the University of Manitoba in Winnipeg, is relatively upbeat about Manitoba’s prospects in 2011 and 2012. The main drivers for both Manitoba and Canada, he says, will be moderate economic growth in the U.S., a relatively strong housing sector and strong demand for commodities.

The high-flying loonie, however, will be a drag on the export market. “I don’t see the loonie coming down [from parity with the U.S. dollar],” McCallum adds. “That’s great if you want to go to Disney World, but not so great if you have an export industry.”

McCallum thinks Manitoba will churn out 2.5% or 2.6% real GDP growth in 2011 and slightly higher next year.

The employment picture also showed improvement last year. According to Statistics Canada, Manitoba had the second-best labour force growth in the country at 2.1%, the second-best growth in full-time jobs and the third-best employment growth. Manitoba’s unemployment rate is only 5.2%.

But, McCallum says, Manitoba has a couple of unique trends that could pose significant risks. First, almost one-third of provincial government revenue comes from federal transfer payments. As Ottawa starts to cut into its $56-billion deficit, Manitoba is likely to feel the pinch. Second, employment stability is mainly due to the public sector. Says McCallum: “Jobs have been heavily driven by public-sector spending, and it’s not clear how long that can be sustained.” IE