Toronto, ON, November 5, 2019 – Ontario’s growth prospects are hampered by slowing global economic growth and persistent trade uncertainty, which will temper export activity and capital investment, according to Central 1 economists in the latest Ontario Economic Forecast for 2019-2022.
The report, authored by Central 1’s Deputy Chief Economist Bryan Yu and Ontario Regional Economist Edgard Navarrete, says growth in gross domestic product (GDP) is forecast to remain mild at 1.8 per cent in 2020, following a disappointing 1.6 per cent expansion in 2019. GDP is estimated to firm to around two per cent in 2021 and 2022.
“Divergent economic conditions in Ontario are expected to persist,” said Yu. “Global uncertainty will weigh on traditional goods sectors while new economies in high-tech, advanced manufacturing and professional services will grow at a moderate pace.”
Ontario’s goods-producing sector is expected to contract slightly this year and underperform during the period, reflecting a subdued export growth of one to two per cent. The services-producing sectors will expand at a moderate pace closer to two per cent, led by the private sector. Above average growth is forecast for professional and technical services, retail trade and accommodations and food services.
Employment growth slows to less than 1.5 per cent over the forecast period following a 2.6 per cent growth this year. Unemployment will hold near 5.5 per cent of the labour force, owing in part to an aging population and increased retirements.
Ontario’s population is estimated to grow at an average rate of 1.5 per cent, well above the yearly average from 2000-2018 of 1.2 per cent.
“Elevated population growth will continue to play a strong part in supporting economic growth, driving housing activity and consumer demand,” added Navarrete. “A swelling population is providing underlying support for the economy. For a second consecutive year, the province’s population rose by more than 1.7 percent. The strongest rise since 2001.”
Increased momentum in the housing cycle will increasingly add to growth following this year’s pullback amidst a declining mortgage rate environment, population growth and tight rental markets.
Housing starts are forecast to rebound in 2020 to 75,300 units following this year’s pullback and hold near 78,000 units in 2021 and 2022.
“After low growth in 2019, residential investment is expected to grow by five per cent in 2020 and 2021,” said Navarrete. “Most of the growth in residential investment will be new home construction but a sizeable portion is expected to come from renovation spending.”
Retail trends are growing at a three per cent rate, reflecting stronger domestic demand, driven by job gains, wage growth and high population expansion.
Highlights from the Ontario Economic Forecast 2019-2022:
- Growth in GDP forecast to remain at 1.8 per cent in 2020 and estimated to firm to around two per cent in 2021 and 2022.
- The goods-producing sector expected to underperform, reflecting a subdued export growth of one to two per cent. Above average growth in professional/technical services, retail trade and accommodations and food services.
- Employment growth slows to less than 1.5 per cent over the forecast period.
- For second consecutive year, province’s population rose by more than 1.7 percent, the strongest rise since 2001.
- Residential investment is expected to grow by five per cent in 2020 and 2021.
- Retail growing at three per cent.
Read the full Ontario Economic Outlook 2019-2022 for more information about the macroeconomic environment, current economic trends, industry, employment and population growth.
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