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MONTREAL, QUEBEC--(Marketwire - May 3, 2012) - While fiscal restraint and a strong Canadian dollar will continue to weigh on the Quebec economy, investment activity, particularly in the resource sector, should lend support, according to the Provincial Monitor report released today by BMO Economics. Real GDP is likely to grow 1.6 per cent this year, down from a 1.7 per cent pace in 2011.

"The Plan Nord will see more than $2 billion injected into infrastructure in the northern part of the province, which should help boost activity in the mining sector," said Robert Kavcic, Economist, BMO Capital Markets. "Investment intentions in mining point to 56 per cent growth in 2012, to $5 billion."

Employment has rebounded from steep late-2011 declines, when 61,000 jobs were reportedly lost in the three months through December. "The jobless rate fell to 7.9 per cent in March from the elevated 8.7 per cent reading in December," noted Mr. Kavcic.

The modest pace of U.S. growth will be an ongoing headwind for manufacturing, especially with the loonie at or above parity. Manufacturing sales were up a decent 5.7 per cent year-over-year in the latest three months, led by transportation equipment and clothing. But, manufacturing employment remains depressed, down 3.4 per cent year-over-year in the first quarter and accounting for little more than 12 per cent of employment versus more than 18 per cent a decade ago.

"Quebec businesses continue to demonstrate a cautious optimism, as they adapt to new market dynamics with investments in product development, production, and in upgrading their operations by purchasing machinery and equipment," said Victor Pellegrino, Vice-President, Commercial Banking, Metropolitan Montreal, BMO Bank of Montreal. "Managing risk, productivity improvements, and opening up new markets will continue to be the top priorities for most businesses this year."

The Quebec government is projecting a $1.5 billion deficit in fiscal 2012-2013 and continues to target a balanced budget by fiscal 2013-2014. "At just 0.4 per cent of GDP, the coming year's deficit is modest both by historical standards and relative to other provinces in Central and Atlantic Canada, helped by the fact that much deficit-reduction work - such as QST hikes, health tax and spending restraint - has already been implemented in prior budgets," stated Mr. Kavcic.

The full Provincial Monitor can be downloaded at www.bmocm.com/economics.

About BMO Financial Group

Established in 1817 as Bank of Montreal, BMO Financial Group is a highly-diversified North American financial services organization. With total assets of $538 billion as at January 31, 2012, and more than 47,000 employees, BMO Financial Group provides a broad range of retail banking, wealth management and investment banking products and solutions.