Ontario’s Economy Set for ‘Modest Rebound,’ Says Report

Ontario’s economy is slated for a modest rebound in growth this year thanks to higher demand for the province’s exports in the U.S. and renewed strength in capital spending at the municipal and regional levels, according to an RBC Economics forecast.

“The recent encouraging developments in the U.S. economy are welcome news in Ontario and for the auto industry in particular,” Craig Wright, RBC senior vice-president and chief economist, said in a statement.

“We expect the strengthening U.S. labour market will continue to spur auto sales south of the border, boosting demand for Ontario-made motor vehicles and parts,” Wright said.

The bank projects a real GDP growth of 2.5 percent in 2012, up from an estimated 1.9 percent last year.

Citing Statistics Canada reports that municipal and regional administrations will soon increase capital expenditures by 15 percent this year, as well as increase provincial administration spending by 5 percent, RBC estimates that the rise in public sector capital spending will drive up economic growth by about 0.3 percent in 2012.

RBC notes, however, that Ontario’s economic performance will continue to face “stiff headwinds” from the high value of the Canadian dollar, further restructuring the manufacturing sector.

Along with additional headwinds due to the federal and provincial governments working to reduce their deficits by ramping up government program spending restraints, RBC expects growth to slow to 2.3 percent in 2013.