After years of challenges, exports of goods from Canada's manufacturing heartland are forecast to grow by 10 per cent to $195 billion following last year's eight per cent growth, courtesy of strong demand from a strengthening U.S. economy and a weaker loonie.
The increase will be driven by pent up U.S. demand for automobiles and industrial machinery, the EDC says.
"That's the first time in a long while that that kind of growth has happened for Ontario," chief economist Peter Hall said from Burlington, Ont.
However, Ontario is forecast to move from best to worst in 2016 when its predicted two per cent growth will trail far behind Alberta and Newfoundland and Labrador, whose exports are expected to grow 19 per cent to $120 billion and $13.3 billion respectively.
The agency forecasts Canada's exports of goods, which grew by 10.9 per cent to reach $491.6 billion in 2014, is expected to remain flat this year and grow by eight per cent in 2016. The value of energy exports is forecast to drop 23 per cent to $109 billion in 2015 even though volumes will rise modestly, and then grow by 23 per cent in 2016.
Quebec is expected to pump out solid export growth mainly from its aerospace, automotive parts and forestry sectors, producing growth of seven per cent in 2015 and six per cent in 2016.
Aerospace is expected to lead with 17 and 20 per cent growth over the next two years, helped by the entry into service of Bombardier's CSeries aircraft. Metals and ores will see modest growth despite weaker prices, while lumber exports are forecast to rise six per cent on higher U.S. housing starts.
The agency forecasts that oil prices — which dropped 34 per cent since last year — will recover to US$61 a barrel in 2015 and to US$71 in 2016.
After growing by 9.4 per cent last year, non-energy exports are forecast to increase by nine per cent this year to $381.1 billion and three per cent in 2016. They will be led by fertilizers, aircraft and parts, advanced technology, automotive and consumer goods.
Agricultural and food exports are tapped to rise eight per cent in 2015 to $60.8 billion. Stronger demand particularly from Asia's growing middle class is expected to boost seafood exports by 17 per cent in 2015 on higher prices for lobster and crab.
Exports are forecast to slip in 2016 because of capacity constraints after years of under investment in Canada, especially in the automotive and machinery sectors, the EDC said.
Hall said industrial capacity constraints in the U.S. creates a big opportunity for Canadian companies and could deliver stronger export growth than forecast.
"We're looking at the possibility of a tsunami of investment in the U.S. and that's going to be good for everybody," he said.
EDC's forecast for the American economy is 3.6 per cent growth in 2015 and 3.3 per cent in 2016. The outlook for Canadian GDP growth is 2.4 per cent for both 2015 and 2016.
"If we can somehow find the capacity to meet the growth that's coming our way then we could see brighter numbers, particularly for Central Canada," Hall said.
Meanwhile, figures provided by the EDC show Canada's territories will be the overall leader in export growth in 2015, rising 12 per cent from $2.2 billion in 2014 before falling to eight per cent growth in 2016.
Other provinces and their predicted export growth in 2015 and 2016:
Prince Edward Island (nine and four per cent), Nova Scotia (seven and three per cent), New Brunswick (-10 per cent and 11 per cent), Manitoba (two per cent and three per cent), Saskatchewan (minus five per cent and seven per cent) and British Columbia (five per cent and six per cent)
Note to readers: This is a corrected story: A previous version indicated total Canadian exports of goods were $586.8 billion