Despite a high Canadian dollar, surging gasoline prices and growing anxiety felt by U.S. households dampening travel to P.E.I. and slowing tourism, the province's economy has maintained a decent pace,
according to the latest provincial forecast released today by RBC. The growth
rate for Prince Edward Island's economy is projected at 1.9 per cent for 2008
and at a slower 1.4 per cent in 2009, as home resale activity, job creation
and tourism cool.
"A large inflow of new residents and strong spending on infrastructure
have helped PEI keep a respectable pace of growth," said Craig Wright, senior
vice-president and chief economist, RBC. "Provincial and federal tax cuts
along with an unemployment rate that is hovering around a 30-year low, have
strengthened consumer sentiment and spending, reflected by higher retail sales
so far this year."
Nonetheless, the report suggests the momentum in P.E.I.'s economy is likely
to slow in the period ahead. Job creation has already moderated since the
spring and home resale activity is past its cyclical peak. Home building is
also expected to enter a consolidation phase, as the large inflow of new
residents runs its course and demand for new housing declines.
The outlook for provinces has generally darkened as a result of the
recent dramatic turn in the year-long financial market crisis. The U.S.
economy now appears to be in recession with Europe, the U.K. and Japan also
sinking fast. While Canada is in better position with its financial sector
less heavily impaired, overall growth will be substantially weaker than
previously anticipated.
Among the provinces, Saskatchewan will lead the way this year and next in
terms of economic growth, with Manitoba closely behind. The Atlantic region is
expected to display continued resilience and should sustain a moderate pace of
expansion for the most part. Conditions in the most western part of the
country are on a deteriorating path. Eroding housing situations and rapidly
slowing growth in consumer spending have prompted downward revisions to the
forecasts for British Columbia and Alberta. With weak external trade
continuing to exert a toll, cracks have appeared in the domestic foundations
of Ontario and Quebec. Ontario will likely see its growth evaporate.
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