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BMO Financial Group

October 16, 2014 09:18 ET

BMO Economics: Canadian Economy Poised for Broad-Based Growth in 2015

- Real GDP growth of 2.3 per cent expected in 2014, 2.4 per cent in 2015

- Alberta to lead the country, but growth gap is set to narrow

TORONTO, ONTARIO--(Marketwired - Oct. 16, 2014) - The Canadian economy gained momentum through the spring and summer, and is in position to post sturdy growth in the year ahead, according to the Provincial Monitor report released today by BMO Economics.

"Real GDP is on pace to expand 2.3 per cent this year, up from 2.0 per cent in 2013, before accelerating to 2.4 per cent in 2015," said Robert Kavcic, Senior Economist, BMO Capital Markets. "Much of the recent strength has been driven by an increased contribution from net exports, as the combination of a weaker Canadian dollar and stronger U.S. economy are clearly helping."

Among the regions, Mr. Kavcic noted that economic growth is finally poised to become more broad-based. "Export momentum, plus the recent slide in oil prices, could narrow the growth gap between Alberta and the rest of the country, although the province remains on top of the provincial growth table. Even with some projects delayed due to rising costs, real GDP is expected to grow 3.5 per cent this year and 2.9 per cent in 2015, the only province near the 3% mark. While the price correction could impact some smaller marginal producers, it would probably take sustained sub-$80 oil to really slow activity in the province."

British Columbia is expected to perform roughly in-line with the national average through 2015, while volatile crop production in Saskatchewan and Manitoba is expected to impact growth.

In Central Canada, weaker oil prices are good news, especially if weakness is attached to a lower Canadian dollar. "Ontario is expected to post 2.0 per cent growth this year and 2.4 per cent in 2015, much improved from just over 1 per cent in each of the prior two years," said Mr. Kavcic. "Quebec's economy should also benefit from stronger U.S. demand, while a newly-elected majority government introduces an element of political stability that has been lacking for some time."

Atlantic Canada will still remain relatively subdued, in part due to demographic challenges and fiscal restraint. But, growth in most of the region is expected to improve from the very modest pace of recent years. "Nova Scotia is poised to lead the pack at 1.6 per cent this year, picking up to 2.1 per cent in 2015, as work begins on the federal shipbuilding contract," stated Mr. Kavcic. "New Brunswick and PEI continue to face stagnant population growth, but a weaker loonie should provide some boost to exports. Finally, GDP growth in Newfoundland & Labrador is now tracking around 1 per cent, although overall trends remain healthy by historical standards."

"The provinces, as a whole, are showing great strength, driven partially by an increased contribution from exports, coupled with both a weaker Canadian dollar and stronger U.S. economy," said Steve Murphy, Head, Canadian Commercial Banking, BMO Bank of Montreal. "Now is a good time for Canadian business owners to invest in their organization -- whether it's in human capital or other business areas -- in order to position themselves for both short- and long-term growth."

Mr. Murphy noted, "These sentiments align with a recent BMO survey -- conducted ahead of Small Business Month -- which found that Canadian business owners' confidence in the state of the economy and their business prospects has risen compared to earlier this year, with one-quarter intending to invest more in their business heading into 2015."

The full Provincial Monitor report can be downloaded at www.bmocm.com/economics.

About BMO Financial Group

Established in 1817 as Bank of Montreal, BMO Financial Group is a highly diversified financial services organization based in North America. The bank offers a broad range of retail banking, wealth management and investment banking products and services to more than 12 million customers. BMO Financial Group had more than $586 billion in total assets and approximately 47,000 employees at July 31, 2014.

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