TORONTO—Ontario’s static economy is set to pick up the pace over the next two years thanks in large part to strong growth in the United States, according to a new CIBC World Markets Inc. report.
The report claims the province’s economy will grow by 2.8 per cent next year and another 2.4 per cent in 2016.
Growth this year will match national growth in 2014 at 2.3 per cent, according to the report.
The report notes that Ontario’s economy has underperformed the national average dating all the way back to the pre-economic crisis years of 2002 to 2007.
“From manufacturing shipments, to domestically driven signposts in retailing, wholesaling and homebuilding, Ontario has seen a notable resurgence, shifting from a perennial trailer to among the better performing regions of the country,” CIBC chief economist Avery Shenfeld said in a statement.
“Employment hasn’t caught fire, but should respond at some point to firming output.”
Shenfeld noted that historically, Ontario’s real gross domestic product (GDP) has had the tightest correlation to U.S. economic activity, and, after years of plant exits, capacity use has actually tightened in the face of demand gains.
“Ontario needs to cultivate growth sectors, rebuild capacity and win the battle for new facilities,” he said.
As such, Shenfield and his colleagues are calling on the Back of Canada “to significantly lag the U.S. Federal Reserve in rates hikes next year” in order to fulfill growth projections.
“A resulting depreciation of the loonie to roughly 85 cents U.S. should reposition the province as a more cost-competitive location,” he continued. “Lower federal (and)provincial corporate tax rates, the shift to the HST, and a $2.5-billion fund set up by the province to court direct investment, could be further enticements.”