Canada's '09 economic plunge accelerating: TD

Canada's economy will take a steep tumble in 2009, with Ontario leading the rush to the pavement, according to Toronto-Dominion Bank on Tuesday.

Canadian gross domestic product (GDP) will shrink by 1.4 per cent next year after barely moving the '08 growth needle by 0.7 per cent, TD said in its latest provincial economic forecast.

Ontario is set for an even bigger contraction than the national economy.

In Canada's most populous province, the GDP will drop by 1.8 per cent, hurt by the extreme uncertainty surrounding the country's auto sector.

Lest other provinces become smug about central Canada's fall from economic grace, however, TD is now forecasting that every province — save potash-rich Saskatchewan — will experience GDP slippage in 2009.

TD's provincial outlook '09 (%)Saskatchewan 0.6 Nova Scotia -0.5 Manitoba-0.5 New Brunswick -0.6 Source: TD Economics

You could call it the revenge of globalization as the increasingly-integrated world economy follows the United States down the economic drain.

"We now expect the U.S. recession to be similar in magnitude to that of 1981-82 while a highly synchronized world economy experiences the deepest recession since the data began in 1960," said Pascal Gauthier, TD economist and author of the new forecast.

Even Alberta, facing a precipitous decline in global oil prices, will see its economy slide in 2009, dropping by an Ontario-like 1.8 per cent next year.

Even Saskatchewan, Canada's newest economic star, will see its economic growth slashed from a robust 3.4 per cent in 2008 to 0.6 per cent in the next year.

Interestingly, both Ontario and Alberta should rebound relatively sharply in 2010. TD expects Ontario to grow by 2.5 per cent in 2010 while Alberta will hit the economic acceleration pedal to the tune of 1.8 per cent.

Saskatchewan will grow by only 1.1 per cent in 2010, the bank predicted.

Canada's downhill ride

Perhaps even more interesting is the acceleration of Canada's economic fall.

Back in January, TD Economics, similar to most other forecasters, predicted Canada's economy would slow in 2008, in its case to 1.9 per cent in terms of GDP growth for the current 12 months. Then, the country would rebound in 2009.

'09 GDP forecast Jan. '08 (%)Dec. '08 (%)Canada2.5 -1.4 Alberta 2.7 -1.8 Ontario 2.5 -1.8 Source: TD Economics, various reports

By November, however, that mild slowdown had turned into an outright recession as the bank revised its forecast to GDP of 0.5 per cent in 2008 and 0.1 per cent in 2009.

Sentiment concerning the Ontario economy followed a similar trajectory.

In January, TD thought Ontario would slow to 1.5 per cent in the current year and accelerate to 2.5 per cent in 2009. The Bank thoroughly shredded its own outlook by November, expecting Ontario not to grow at all in 2008 and shrink by 0.4 per cent in 2009.

TD's newest forecast means Ontario's growth rate will have been cut by 4.2 percentage points since the bank's initial prediction in January.