Now that the eagerly awaited pick up in the U.S. economy is starting to take root, albeit slowly, Canadian economists predict positive growth for their economy in the second half of 2009. As the largest trading partner to the United States, Canada's economy is closely linked to its ups and downs. Major improvements are expected to Canada's economy for 2010.

For one province, Saskatchewan, the turnaround will be most welcome, as the resource-rich province's economy has been hit especially hard during the recession. As the world's leader in the production of potash, the expected increase in demand for the resource, which is used in fertilizer, for example, bodes well for 2010, as does its healthy construction sector.

For Saskatchewan's neighbor to the east, Manitoba, things haven't been as difficult in 2009. The province is not as dependant on the resource sector. And for the past few years, the province has benefitted from the development of public infrastructure projects. Even though some of the projects will be winding down in 2010, the province is expected to grow 1.8 percent.

The Conference Board of Canada's Marie-Christine Bernard shares her insights for the future of the economy.

Global Corporate Xpansion: Marie-Christine, what is the Canadian economy's outlook for the remainder of 2009?

Marie-Christine Bernard: We are forecasting positive growth in the second half of 2009 for Canada. Looking at 2010, with the stronger growth in the United States, which will be underway with its recovery, even though it won't be fully recovered, Canada will benefit from the better outlook south of the border. Specifically in Ontario because the auto industry has been very effected and hit bottom. We have seen stronger production numbers over the summer. And because it was at such a low level, we should see some improvement in 2010.

Our weakness this year came from Ontario and Alberta and other resource-rich provinces that were affected by the global recession. As the U.S. economy improves and the global recession ends we should see stronger growth in Alberta, Saskatchewan and British Columbia. It should lead to fairly strong growth at the Canadian level of 2.9 percent for 2010, following a drop of 2.1 percent for 2009.

GCX: Let's talk about how Saskatchewan and Manitoba have been faring.

Bernard: This is based on our summer forecast, as we haven't completed our fall forecast [at the time of the interview]; however, I don't think there will be too much difference in the data. Saskatchewan is definitely the province where we will see weaker growth in 2009 because of the resource sector and in particular, very weak mining activity globally. For example, fertilizer demand was cut back significantly so there was a lot less potash production, and Saskatchewan is one of the world's leaders in this sector.

Also, the weather was not favorable to the agriculture sector in Saskatchewan in 2009. There were some areas that did not receive a lot of precipitation. So we will see a big decline in the agriculture sector, which is quite significant in that province.

What's more, Saskatchewan, which had a good year in 2008 in terms of housing consumption; saw a correction in 2009. We saw weaker housing activity, and consumer demand collapsed.

So in 2009, we forecast a drop of 2.7 percent for Saskatchewan's economy. Unfortunately, Saskatchewan is a bit of a roller coaster, where one year it can be up and one year it can be down. It will easily turn around in 2010 as potash production resumes, fertilizer demand will pick up, and agricultural prices are expected to pick up, as we can only expect a normal crop.

With those two sectors coming back, combined with the fact that there is construction activity going on in the province, we are forecasting growth of 3.5 percent for 2010.

For Manitoba, which is not as dependant on the resource sector, it is actually one of the few provinces where we will see positive economic growth in 2009, at 0.8 percent. Even though that number isn't really strong, it is still good because most provinces are seeing a decline in real GDP growth.

The construction sector is doing really well in Manitoba. There are a lot of public infrastructure projects underway, as well as hydro-related developments. The construction boom has actually been going on for a few years now.

So in 2010, since the economy in Manitoba didn't do as poorly in 2009, there won't be a big rebound in 2010, where we are forecasting growth of 1.8 percent. Construction activity on some of the major projects will be winding down so there will be less stimulus monies coming in from the construction sector.

GCX: Speaking of stimulus funding, comment on what has been happening at the federal level, and within provinces in regard to growing the economy.

Bernard: The federal government did announce infrastructure investment. It will help the economy this year and next year, as the money is spent, until about the middle of next year.

There were also tax cuts that were announced at the federal level. Most provinces also announced their own stimulus packages. As a consequence we are going to see a return of deficits for most provinces. Large deficits are expected in Ontario and Québec.

In Alberta, revenues are down; however, the province has a fund they have accumulated during the past 10 years due to high energy prices. They will use that money to offset the deficit. They are facing a big shortfall this year.

To sum up, there is a lot of stimulus in play but it will take a few years to balance the books for most provinces, even though the economy will recover quite strongly.

Marie-Christine Bernard is the associate director, provincial forecast, for the Conference Board of Canada. She can be reached by e-mailing bernard@conferenceboard.ca. The Conference Board aims to be recognized as Canada's most influential, independent source of insights for leaders. It builds leadership capacity for a better Canada by creating and sharing insights on economic trends, public policy and organizational performance. Visit the organization at www.conferenceboard.ca.