Quebec's economic growth is expected to slow to 1.1 per cent in 2008 and then rise to 2.2 per cent in 2009, according to the latest provincial economic outlook released by RBC.
"The strong Canadian dollar, elevated energy prices and a slowing U.S. economy have weighed heavily on Quebec's critical manufacturing sector," said Craig Wright, senior vice-president and chief economist, RBC. "However, some efforts are underway to keep the province's investment climate competitive both within Canada and on the international stage."
Some of the steps taken to keep Quebec's investment climate competitive include decreasing tax rates on new investments to 18.8 per cent in 2012, eliminating the capital tax for manufacturers effective immediately and by 2010 for all businesses, and providing additional relief via a new investment tax credit of five per cent for the purchase of manufacturing and processing equipment.
The report stated that the composition of Quebec's manufacturing base makes it less vulnerable than Ontario to slowing U.S. demand. The province has very limited exposure to the automotive industry and strong gains in petroleum and coal, primary metals, chemicals and fabricated metals are supporting manufacturing shipments.
The growth gap between the commodity-rich Western provinces and manufacturing-heavy Central Canada is expected to persist in 2008. Across Canada, Saskatchewan is expected to be the top growth performer this year as its economy benefits from strength in energy, mining, and agriculture sectors. Conversely, Newfoundland and Labrador should be the laggard as waning oil production weighs on its growth. The strong Canadian dollar and softer U.S. demand for exports continue to weaken manufacturing sectors across the country. Ontario's weak trade sector will see the province teeter on the brink of recession through 2008, but it should pick-up in 2009 to coincide with a recovering U.S. economy.
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.
The report available at www.rbc.com/economics/market/pdf/provfcst.pdf