TD Economics latest forecast for provincial economies has the Newfoundland and Labrador economy growing at less than one half of one percent in fiscal 2008, the lowest growth rate of any province in the country.
The quarterly forecast, issued October 16, puts real growth in gross domestic product only slightly behind that of Ontario and projects 2009 growth as being about 1.3%.
However, if the oil comments in the forecast are anything to go by, there is reason to doubt the validity of the TD Economics forecast:
After super-sized growth of 9.3% last year led by offshore oil output and exports, the Newfoundland & Labrador economy will struggle to expand, on an annual basis, in 2008. While high oil prices have helped to boost incomes (wage growth is running at 8.7% year-to-date), oil extraction is depressed due [to] the maturation of the oil fields. This will continue into 2009 and 2010. Expansions at the Hibernia and White Rose fields could help level off output, but a sustained rebound in oil production is not in the cards before 2014, which is when the Hebron project could come online.
Hebron won't start construction until about 2013/2014 - according to the project partners - and that assumes the project is sanctioned within the next 12 months.
First oil is not currently expected before 2018, assuming a very short construction.
Even at that point, Hebron will will merely replace production from some existing fields which at that point will likely have been all but exhausted.
TD Economics' forecast for Newfoundland and Labrador matches almost exactly the projections by RBC Economics. Scotiabank's 2008 forecast is higher, at 1%, while its projection for 2009 matches the TD and RBC projection exactly.
The provincial government's budget forecast [left, Budget Speech]including a 2% shrinkage in real GDP in 2008, growth in 2009 now three times higher than that of private sector forecasters, followed by -2.8% in 2010. The provincial government forecasts nominal GDP growth at -1.9% in 2009 and -5.0% in 2010.
The province's finance minister hasn't indicated when he will issue a mid-year economic update. He has been portraying the gloomy private sector forecasts as an improvement on the provincial government's own budget estimates. At the same time, he hasn't reconciled his glowing revenue forecasts with the budget numbers. The contradictions remain unexplained.
While both the Premier and Memorial University economist Wade Locke have given rosy projections for the province's ability to avoid any dramatic consequences from the global crisis, it seems unlikely the Newfoundland and Labrador economy will be able to sustain Locke's pollyannaish claim that government's projections of a half billion dollar surplus will be met or exceeded.
On Wednesday, the Ontario government revised its budget estimates and is now projecting a half billion dollar shortfall for fiscal 2008.
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