Here’s how Scotiabank sees the outlook for provincial economies

Canadian provincial growth will be led by British Columbia in 2019 and 2020 according to a new report from Scotiabank Economics.

It’s Q3 Provincial Economic Outlook calls for real GDP growth of 2.2% in 2019 and 3% in 2020 with job creation to rise 3% this year and 1.5% in 2020.

The report also suggests that the decline in the BC housing market over the past year or so may be bottoming out. With homebuilding remaining strong and sales normalizing from the surge of 2018, the report says that further erosion of affordability should be avoided even as demand rises.

However, BC’s trade outlook has worsened, not least because of US tariffs on lumber.

"With continued strength in job creation and major project activity in 2019 and 2020, British Columbia will lead the provinces with respective real GDP gains of 2.2% and 3.0%," said Marc Desormeaux, Provincial Economist at Scotiabank. "Quebec and PEI round out the top three this year; 2019 forecasts have been marked down for Alberta and Ontario, but both provinces should show stronger growth in 2020."

The outlook includes an upward revision for Quebec to 2.1% real GDP growth in 2019, largely reflecting expectations of stronger-than-anticipated household spending gains.

Alberta, the report says, should avoid recession but the bounceback from its 7.4% drop of 2015-16 is likely to be in 2020 now rather than this year.

Scotia’s team notes the divergence of Alberta’s economy from its reliance on energy.

The housing market and trade are concerns for Ontario with lower investment in residential building than previously expected and a declining outlook for auto manufacturers.

Although there has been an increase in some areas of business investment, continuing trade issues including the US-China dispute is weighing on sentiment.

Highlights of Scotiabank's Provincial Outlook include:

• Pipelines: transportation capacity issues remain in place and are behind downward revisions to the forecast in the western Canadian oil patch.
• Government Policy: provincial governments continue to take different approaches to economic management, as demonstrated by new plans and details of previously announced policy.
• Housing: housing markets dragged on growth in Ontario and BC to begin 2019 but are set to align more closely with economic fundamentals across the country.
• International Trade: diplomatic tensions with China present significant downside risks for growth in several jurisdictions and add to an already uncertain trade outlook.
• Population Growth: above-trend population gains have continued across much of the country, and compositional shifts are key to forecast changes across a number of provinces.