Canada's economy is on a strong growth path, but will expand slower next year than in 2007, says the Royal Bank Financial Group's latest economic forecast.
The economy is likely to expand to 2.5 per cent in 2007, down from 2.7 per cent this year.
The percentage drop in 2008 is being blamed on sluggishness in Ontario, moderating growth in the West and a sharp slowdown in Newfoundland and Labrador.
The report predicts inflation will remain controlled, with the national consumer price index seen rising by two per cent -- following a 2.3 per cent increase this year.
Ontario's economy is expected to grow only 1.8 per cent in 2008, down from 1.9 per cent in 2007, says the report.
"We've had to significantly lower our growth forecasts (for Ontario) as heightened currency-induced challenges to manufacturing and exports have greatly affected the province's economy,'' commented RBC chief economist Craig Wright.
Newfoundland and Labrador is expected to suffer a significant drop, growing by only 0.5 per cent in 2008 -- following a 7.5 per cent growth in 2007.
"Beyond 2007, growth will drop sharply once the White Rose gas project and Voisey's Bay nickel project have fully worked their way into the economy,'' said Wright.
The economy is expected to regain strength by 2010 when other offshore oil projects begin construction.
Alberta's economy is forecast to expand 4.5 per cent in 2008, down from 2007's projected growth of five per cent.
Saskatchewan will also see a drop to 4.3 per cent from 4.8 per cent in 2007, says the report.
Manitoba is forecast to show a three per cent growth in 2008, down from 3.4 per cent this year. B.C. is expected to drop to 2.9 per cent from 3.1 per cent.
Meanwhile, Nova Scotia and New Brunswick "are well positioned for better long-run growth as a result of renewed prospects for several large-scale capital projects,'' says the report.
The report also states the economy's momentum translated to a growth rate of more than 3.5 per cent for the first half of 2007, bolstered by soaring Canadian export prices.
Canada is among a handful of countries reporting stronger than expected growth for the first half of this year.
China, the Eurozone, and the United Kingdom all reported higher than normal gains.
Canadian consumers and businesses are also spending more thanks to overall wage increases and a national job boom.
The increase in spending will likely help to offset any damage done by the soaring Canadian dollar or the weakened export industry, says the report.
Employees earned 4.2 per cent more per hour last month compared to September 2006 representing the largest wage increase since 1997, according to a recent Statistics Canada report.
And Canada's jobless rate hit a record low with only 5.9 per cent of Canadians unemployed in September, down from six per cent in August.
The total number of positions created in the country this year reached 283,000, representing an increase of 1.7 per cent for the period.
With files from The Canadian Press
