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Thursday, February 18, 2010

Ontario's Growth Spurt

Get ready, Canada! Ontario is about to set a new record.

With the country now emerging from the recession, it's time to take stock and assess the damages. As a province dependant heavily on its manufacturing sector, Ontario's GDP was one of the worst performing, matching those of Newfoundland and Labrador, contracting in 2009 by 3.5%. However, as many companies have a need to restock depleted inventories, Ontario is now benefiting from a business boom. Economic forecasts predict that Ontario's GDP will grow by 2.4% in 2010, outpacing the national rate that is projected at 2.3%. This will be the first time in eight years that Ontario has excelled in terms of national growth. This growth is expected to continue into 2011 and reach 2.8%, although national levels are expected to reach 3% next year. Economists fear, though, that restocking inventory will only provide temporary relief. As the warehouses and shelves are filled, orders will taper off and return to earlier levels.

The growth in the GDP is good news for a province that is burdened by a massive deficit, the largest of all the nation's provinces. Higher energy prices as well as competitive foreign markets are making it difficult to cope with the deficit. On the other hand, the HST, due to take begin on July 1, is expected to help ease the deficit burden. Combined with the HST, new, lower corporate taxes are expected to attract investments and new jobs to the province.

While manufacturing will experience a temporary post-recession growth spurt, Canada's abundant natural resources will still lead the way economically. Saskatchewan is expected to remain the leader among provinces, based on the strength of its oil, potash, agriculture and uranium sectors. British Columbia and Newfoundland, both of whom suffered during the recession, are also expected to experience significant economic expansion in the coming year.

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