TORONTO - Ontario won't slide into a recession despite the expectation of additional manufacturing layoffs in the "near future,'' the Conference Board of Canada said Tuesday.
A soaring Canadian dollar and slowing U.S. market will continue to plague the province, where the economy is expected to grow 2.1 per cent this year and 2.9 per cent in 2009, the board said in its provincial economic forecast report.
Those predictions are higher than most forecasts put forward by big bank economists and Finance Minister Dwight Duncan, who is projecting growth of 1.2 per cent this year and 2.3 per cent in 2009.
The board's outlook is more optimistic because it's not predicting a U.S. recession, said Mari-Christine Bernard, associate director of the board's provincial outlook report.
"It's no surprise that weakness in the U.S. economy will challenge the manufacturing sector in Ontario,'' she said. "If it's a lot weaker than what we predict, yes, the 2.1 per cent might be on the high side.''
Ontario is still on track to post a surplus this year, said a spokesman for Duncan, who will table the next provincial budget March 25.
"Going forward, we will be cautious in our growth and revenue forecasts recognizing that both Ottawa and B.C., are predicting real declines in revenues for the coming year,'' said Steve Erwin.
Ontario and Quebec "will be challenged by the sombre outlook in the United States -- although neither province is expected to slip into recession,'' the report said.
Meanwhile, provinces west of Ontario will continue to chug along, driven in part by strong construction activity and a growing service sector.
Manitoba's economy is expected to lead the way with growth of 3.7 per cent this year, boosted by construction projects, domestic spending and growth in its manufacturing sector, the report said.
By contrast, manufacturers in Ontario and Quebec have been struggling, with Ontario losing 20,000 manufacturing jobs in February alone. The province still managed to add 46,000 jobs, mostly in construction and public service, but its weak auto sector continues to drag down the provincial economy.
The auto sector, which dominates Ontario manufacturing, is one reason why Manitoba is expected to fare better by comparison, Bernard said.
Planned auto production cuts and delays in operations at the new Toyota plant in Woodstock, Ont., will "significantly hinder'' export growth in the province, according to the board's outlook.
But a slowing U.S. economy doesn't have as much of an impact on Manitoba's well-diversified manufacturing sector, which is expected to grow an average of 5.5 per cent over the next two years, largely due to large orders for buses and aircraft parts, said Bernard.
"It's a different mix of industries, so I don't think it's comparable (to Ontario),'' Bernard said.
"Until the U.S. economy gets back on its feet, we're going to see a weakness in the manufacturing sector in Ontario.''
Ontario's economic troubles have fuelled clashes between Ontario's Liberal government and the federal Finance Minister Jim Flaherty, who wants Premier Dalton McGuinty to slash corporate income taxes in the upcoming budget to 10 per cent from the current 14 per cent.
McGuinty's economic policies have also come under attack from opposition critics, who say the Liberals are contributing to the province's slump.
"Dalton McGuinty's high taxes, runaway spending and expensive energy policies have chased some 180,000 well-paying manufacturing jobs from our province,'' said Conservative critic Tim Hudak.
There are ways to help Ontario manufacturers, such as lowering electricity rates, but the Liberals are ignoring them, said NDP critic Michael Prue.
"I know he's out there fighting with Jim Flaherty ... but on the other hand, there are simple things that can and should be done to really improve manufacturing and manufacturing jobs in Ontario,'' said Prue.
