The Newfoundland and Labrador economy may slip into recession over the next 12 months, if some current projections hold true.
Forecasts to date had the Newfoundland and Labrador economy flat-lining over the next two years or experiencing extremely modest growth of less than 2%. The provincial government's own economic analysis division forecast last April that economic growth in the province during 2008 would be 0.8%.
The division also forecast gross domestic product in the province would increase by 3.4% in 2008 and decline by over 11% in 2009, with a further 4.4% decline in 2010. In "chained" 2002 dollars, GDP is forecast to decline 1.8% in 2008 and 1.9% in 2009.
All of that - in a forecast dated last November - included an assumption that the American economy would "grow by 2.2% in 2007." As well, "growth is expected to average 3.0% per year over the remainder of the forecast period," which ends in 2010.
That might not be an accurate picture, as it turns out.
Goldman Sachs is assessing the American economy is already likely falling into recession. According to the Globe and mail, Merrill Lynch is now forecasting that the "Canadian economy is poised for a sharp slowdown as U.S. demand weakens...". The recession is forecast to last from two to three quarters (six to nine months) and will be mild by historical standards. Growth is forecast by Goldman Sachs at 0.8% over the year.
In Canada forecasters are already adjusting their projections for Canada in 2008, with growth in one worst case scenario hitting on 1.4% nationally compared with earlier forecasts of 2.4% or more.
A recession in the United States - even if relatively mild by some standards could have a significant impact on Newfoundland and Labrador. The United States is the province's largest foreign trading partner, receiving 52% of the province's exports in 2005.
Given that experts are revising downward their forecasts for overall Canadian and American economic performance over the next 12 months, it is reasonable to conclude that the provincial economy will perform more poorly than earlier predicted.
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