ST. JOHN’S,
June 25, 2009 – While
Newfoundland & Labrador will likely suffer the deepest drop in
GDP this year among the Canadian provinces, 2010 will see a significant
rebound, according to the Provincial Outlook report released by BMO
Capital Markets Economics.
“Lower offshore oil output and a more recent slowdown in domestic
activity will mean a contraction of real output by 3.5 per cent this
year,” said Robert Kavcic, Economist, BMO Capital Markets. “But
growth will be rekindled, with a 2.4 per cent rebound in 2010.”
Output at the province’s
three major offshore oil projects is expected to decline about 20 per
cent this year, weighing heavily on
headline real GDP. However, while construction of the Hebron project
has now been pushed back to 2012, work on the Hibernia South expansion
could commence in 2010, now that the Province has taken a $30 million
stake in the project. That, combined with a rebound in oil output, should
lead to the revitalized growth.
A weakened energy
sector this year has also had an impact on domestic demand, which until
recently
had held up relatively well. Now, however,
the unemployment rate has moved above 15 per cent and retail sales have
turned slightly negative year-over-year. Still, the province’s
housing market is a rare glimmer of strength with average prices up about
20 per cent year-over-year through May. Renewed population growth, driven
largely by return migration from Alberta and Ontario, has helped the
cause, allowing residential construction activity to hold steady while
most provinces are experiencing material declines.
The Province’s
$4 billion infrastructure investment program is the most aggressive
in Canada,
representing about 5 per cent of GDP this
fiscal year, which should help offset some of the near-term pain in the
energy sector. The Province is forecasting a $750 million deficit for
fiscal 2009/10, a steep shift from a fourth consecutive surplus of $2.4
billion in fiscal 2008/09. Revenue is expected to decrease nearly 17
per cent to $5.8 billion in fiscal 2009/10, reflecting a $914 million
falloff in oil royalties (the combination of lower prices and lower production).
Program spending is projected to grow nearly 13 per cent to $5.8 billion.
The complete report can be found at www.bmocm.com/economics.
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