It says Alberta and Saskatchewan will continue to lead the other provinces in economic growth this year, but the pace will fall below three per cent.
In the other eight provinces, TD is estimating 2012 growth will be less than two per cent.
In most provinces, the new TD estimate is below the outlook it issued in July, with the exception of Manitoba and Prince Edward Island.
"In Europe, while a dramatic escalation in the financial crisis has been avoided and mechanisms aimed at preventing such an outcome have been agreed upon, risk levels remain high," the report says.
It adds that the U.S. economy has been recovering at a "disappointing pace" and exports to Canada's largest foreign customer have been constrained by the high value of Canada's dollar relative to the U.S. currency.
"Moreover, China’s soft landing and the maturation of growth in many emerging market countries have set limits to what had appeared to be almost boundless demand — a development that has not been lost on commodity markets."
In Canada, TD notes the federal and provincial governments have launched extensive efforts to restrain their spending and home prices has begun to come down in after years of rapid growth in some markets.
It suggested Canadian households across the country — particularly in Ontario — are being more cautious than previously expected.
"Construction of commercial properties (in Ontario) is brimming and the housing market has maintained its upward path despite signs of some overvaluation in its major markets, especially in the Greater Toronto Area."
"At the same time, however, households have shown increased caution, as evidenced by weakening retail sales gains and a reduction in the pace of debt accumulation."
The report says housing markets will face different outlooks depending on the region, with the Prairies likely to be "largely unscathed" and the major markets in Toronto, Montreal and Vancouver to show declines.
"The varying residential market conditions will exacerbate growth differentials given that housing is a large driver of consumer spending," the report says.
TD adds that its forecasts for 2013 and 2014 are looking more positive, although it expects growth will continue to be modest.
The revised forecast calls for Saskatchewan to have the fastest economic growth of any province, with an increase of 2.9 per cent over last year. Alberta is in the No. 2 spot at 2.8 per cent projected growth this year.
Newfoundland and Labrador is at the other end of the spectrum, with its growth falling dramatically from 2.8 per cent last year to 0.9 per cent in 2012 — the lowest among the 10 provinces.
Ontario, Quebec and British Columbia — the three most populous provinces — are now projected to have 2012 growth of 1.9 per cent, 1.5 per cent and 1.7 per cent respectively.
Manitoba's growth is projected to be 1.9 per cent — matching Ontario's — while P.E.I. will lead the Atlantic provinces at 1.8 per cent, followed by Nova Scotia (1.3 per cent) and New Brunswick (1.0 per cent) and Newfoundland (0.9 per cent).
For most provinces, TD is forecasting stronger growth in 2013 than this year and further improvement in 2014.
Newfoundland's growth in 2013, bolstered by its oil and gas resources, is projected to be 2.3 per cent followed by 2.5 per cent in 2014. The growth in the other three energy-rich provinces — Alberta, Saskatchewan and British Columbia — is estimated at 3.1 per cent, 3.0 per cent and 1.9 per cent respectively.
Ontario is one of only two provinces that's expected to see slower economic growth next year, falling to 1.8 per cent from 1.9 per cent. The other laggard is expected to be P.E.I., with 1.4 per cent growth down from 1.8 per cent.
The projected 2013 growth rates for the other provinces are: Nova Scotia, 2.0 per cent; New Brunswick, 1.4 per cent, Quebec, 1.7 per cent; Manitoba, 2.1 per cent.