Economy of Ontario to cool, Alberta to cook

Ontario’s economy will cool this year but Alberta’s economy should keep on chugging strongly until at least 2005, says a study by the Bank of Montreal.

The combination of the U.S. slowdown, rising energy costs and the lagged impact of last year’s interest-rate hikes will drag on Ontario’s economy this year, but the province’s long expansion isn’t about to end, according to the study.

Growth will regain momentum in the second half of this year and continue through 2005.

The Canadian Regional Outlook calls for Ontario’s economy to grow by 2.2 per cent in 2001, down sharply from its estimated 5.2-per-cent pace of last year.

The province’s important auto sector will be hit hard, with output expected to fall by at least 4 per cent this year.

Similarly, some of the high-flying sectors of the 1990s boom, such as electrical and electronic products, software, and communications services, will see sharply lower rates of growth this year.

The result will be slower export growth which, coupled with consumer caution, will stunt Ontario’s expansion in 2001.

Bank of Montreal economists expect this slowdown to be temporary, however.

Renewed U.S. growth in the second half of this year will restart momentum in Ontario’s export-oriented economy.

The study also cautions that the Ontario government needs to address its heavy debt load to ensure that the province can upgrade its infrastructure and be competitive with its corporate and personal tax rates.

As for Alberta, the study says high energy prices will help it lead all provinces in economic growth this year. In addition, broad-based strength will keep Alberta growing strongly through 2005.