April 22, 2008

Ontario’s slow economic growth sparks talk of recession

TORONTO

Fourth-quarter results released by the Ontario Ministry of Finance show the province’s economy was still growing at the end of 2007, but at such a slow rate that one of Canada’s top economists is warning a minor recession is a possibility this year.

The figures show Ontario’s economy grew at 0.1 per cent between October and December, compared with growth of 0.2 per cent for all of Canada over the same period. By comparison, the United States economy grow at the same rate as Ontario’s in the fourth quarter.

Finance Minister Dwight Duncan said he was “cautiously optimistic” Ontario’s economy would keep growing in 2008 and would not fall into negative territory, noting the province has done well considering the challenges of a high dollar and faltering U.S. economy.

“This is a North America-wide phenomenon,” Duncan said. “We feel it, but we’re also seeing that the diversity of our economy, the kinds of investments that we’re making as well as the private sector, are helping to keep us in positive territory.”

Don Drummond, senior vice-president and chief economist at TD Bank Financial Group, said Ontario could slide into negative growth before things start picking up again in 2009, noting he is forecasting growth of just 0.5 per cent for the year.

“My guess is if we’re right on our annual forecasts of 0.5 (per cent), there will certainly be a negative quarter somewhere, could quite possibly even be two consecutive negative quarters, which would be our traditional definition of a recession,” Drummond said.

“The Ontario economy at the moment is going sideways. Whether it’s on a slight negative tilt or a slight positive tilt, I think is pretty irrelevant. It’s going sideways, and in our forecast it will continue to go sideways until well into 2009.”

Drummond called the outlook “pretty bleak,” but said any downturn would not be like the deep recessions of 1981 and 1991, “but it’s still very weak, and that will drive up the unemployment rate.”

Progressive Conservative Leader John Tory said the province is teetering on the edge of negative growth, and complained that the Liberal government’s high tax policies are to blame for the loss of 200,000 manufacturing jobs.

“(Premier Dalton) McGuinty will continue to point to the economy as a healthy specimen, whereas I think it’s a poor, anemic specimen compared to what we’ve been used to in the past,” Tory said.

Canadian Press

Print | Email | Comment