20 July 2007

Scotia confirms predicted economic slowdown

Scotia Economics' latest forecast for Newfoundland and Labrador confirms the predictions thus far that the province's economy will drop to the bottom of the pile for growth in 2008, after leading the country in 2007.

Here's the section, for the record:
Newfoundland & Labrador will lead the Atlantic provinces in overall growth this year with a 4.8% advance before dropping to 1.2% in 2008. The province will benefit from mining and oil & gas extraction this year, given the resolution of earlier labour and production issues. An expansion at the White Rose oil field late last year is providing an additional output boost. Oil and gas production is expected to level off in 2008, as production peaks at the Hibernia and Terra Nova fields. Following labour issues last year and given strong pricing, nickel production should increase this year. Production started up at the Duck Pond mine earlier this year, providing a boost in output for copper and nickel. Exploration activity for uranium, iron ore and oil and gas remains vibrant.

Newfoundland & Labrador’s seafood processing industry is finding it difficult to replace older workers, given relatively low wages and competition amongst Atlantic Canada’s fisheries for the small pool of available workers. Shrimp and crab production are expected to remain the same as last year, although a modest increase in the E.U.’s import tonnage cap for cooked and peeled cold-water shrimp should be of some benefit. Newsprint mills continue to push through cost-cutting initiatives, although further shutdowns could be required.

Private investment should decline this year and next as no major projects are on the horizon. Potential projects, including the Lower Churchill dam, a second refinery at Placentia Bay and development of the Hebron and Hibernia South oil fields remain on hold. The services sector could see stronger tourism activity this year due to an increase in convention and cruise bookings, although Canadian dollar strength continues to pose a threat. Household incomes and retail sales will get a boost from tax cuts passed in the last provincial budget, although a diminishing population and net westward outflow of workers could limit the impact.