Posthaste: The province leading RBC’s growth forecast by a mile might surprise you

The fishing village of Joe Batt's Arm, Fogo Island, Newfoundland and Labrador. This province is expected to lead Canada's growth this year. Photo by Getty Images

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Only one Canadian province will buck the national trend of decelerating growth this year, fuelled by higher resource prices, predicts the Royal Bank of Canada. 

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Has to be Alberta, right?

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Nope. Newfoundland and Labrador tops the RBC growth ranking with real gross domestic product forecast to rise to 4 per cent in 2026, from 3.5 per cent the year before, the only province where growth is expected to accelerate.

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Higher commodity prices and increased production in both oil and mining sectors led RBC to upgrade its forecast for the province from 1.8 per cent to 4 per cent.

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Oil output year to date is up almost 30 per cent in the province after idled offshore vessels were brought back to full operation, said RBC. At the same time oil prices have soared.

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Mining is another strength. As gold prices hit record highs, the Valentine Gold mine in central Newfoundland began production and is expected to reach full capacity in the second quarter of this year.

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“The confluence of production expansion and high prices is setting the natural resources complex up for a record year,” said the RBC team, led by chief economist Frances Donald.

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Newfoundland’s success story, however, comes with a caveat.

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Because the resource industry is capital intensive, output growth is not translating into a flood of new jobs, said the economists.

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“The commodity boom is narrowly concentrated, leaving households largely on the sidelines.”

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Since the launch of Donald Trump’s tariff war early last year, the economies of Canada’s provinces have diverged dramatically. The manufacturing hubs in central Canada most exposed to tariffs have taken the biggest hits, while energy and mining provinces have outperformed.

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“Tariffs, demographic shifts and commodity cycles are keeping Canada’s provinces on different tracks,” said the economists.

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Alberta might not top the ranking, but it comes second with the energy sector as the main driver of growth. The Iran war has kept oil prices high and supplies tight, and with the aid of the Trans Mountain pipeline expansion, energy exports to non-U.S. markets are up by $4 billion or 65 per cent year over year, said RBC.

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Planned optimizations could increase the pipeline’s capacity by 90,000 barrels a day by next year.

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Yet RBC puts Alberta’s GDP growth at 2 per cent this year, down from 2.7 per cent in 2025, as slowing population gains weigh on other areas of the economy such as residential construction.

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Central Canada is where the outlook gets bleak.

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Ontario’s real GDP growth is expected to slump to 0.4 per cent this year from 1.3 per cent in 2025, which would be the slowest year on record outside of a severe recession, said RBC.

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U.S. tariffs continue to weigh on manufacturing and investment, especially in the southern regions of the province, and the housing correction is also dragging down growth.