23 June 2010

The Fragile Economy confirmed

BMO Capital Markets lays out the scope of the problem:

Newfoundland & Labrador [sic] saw a sharp 10.2% real GDP contraction in 2009, the worst performance in Canada. However, improvement in the mining sector and a reversal of some temporary factors will drive 4% growth in 2010 and solid 2.8% growth in 2011.

Problem? sez you, wiping the purple freshie from your lips. 

Growth returns. 

Here’s the problem:

However, the biggest economic driver in the province in the next two years will be construction activity. Government infrastructure spending will total about $1 bln in FY2010/11, helping boost total
capital spending an expected 23% in 2010. Provincial government infrastructure spending will amount to more than $5 bln over the next several years, keeping the economic fuel burning into 2011. At more than 3% of GDP, the Province’s infrastructure program is among
the largest in Canada relative to the size of the economy.

It is definitely not good when the public sector is driving the economy to such a degree.

And as for all the rosiness in BMO’s outlook. 

Well, let’s just say they obviously haven’t done any detailed analysis of the local economy especially if they think the recent population growth is driven by anything other than migrant labourers returning home from other parts of the country.