Quebec's economy is expected to grow by a modest 2.1 per cent in 2007, according to the latest provincial economic outlook released today by RBC.
"In 2006, Quebec's economic growth was below the national average and his will continue for 2007," said Craig Wright, vice-president and chief conomist, RBC. "However, growth will remain steady albeit soft, with several factors such as stimulative fiscal policy and strength in business investments helping to provide economic support."
According to the RBC report, Quebec's diverse manufacturing sector helped offset further drags on growth with a three per cent gain in manufacturing shipments in 2006. RBC forecasts that conditions should remain positive for key industries such as aerospace and primary metals, specifically aluminum, in 2007.
Quebec will also get economic support through increased federal transfers. "If Quebec's budget is passed in its current form, it will add further stimulus, including a pay equity deal that will single-handedly add about a quarter point to near term economic growth," added Wright.
RBC notes that like other parts of Canada, Quebec should see considerable strength in business investment offset a cooler housing market. Manufacturing investment will be further strengthened due to accelerated Capital Cost Allowance (CCA) rates introduced by the federal budget. Two year write-offs for equipment spending, and more than doubling the CCA rate for investments in buildings and computers, will add to capital project strength this year and help offset an expected deceleration next year before big projects kick into high gear in 2009.
For the overall Canadian economy, RBC forecasts that the gap between growth in the more heavily resource based provinces and central Canada will narrow over 2007-08. Newfoundland and Labrador will be the leader this year with growth of four per cent followed by Alberta at 3.6 per cent. Prince Edward Island and Ontario will be at the back of the pack, each with growth rates of about two per cent.
The RBC Economics Provincial Outlook assesses the provinces according to economic growth, employment growth, unemployment rates, personal income growth, retail sales, housing starts and the Consumer Price Index.
According to the report at www.rbc.com/economics/market/pdf/provfcst.pdf).