ST. JOHN'S, NEWFOUNDLAND--(Marketwire - May 3, 2012) - Newfoundland & Labrador is likely to see a more mixed economic picture this year, with capital spending growth offset by declining oil production, according to the Provincial Monitor report released today by BMO Economics. Real GDP should grow 1.0 per cent this year, down from 2.8 per cent in 2011 and 5.8 per cent in 2010, but domestic demand should run quite a bit hotter.
"Construction and capital investment activity have been key economic drivers in the province in recent years, and early survey results suggest that growth will continue at a strong clip in 2012," said Robert Kavcic, Economist, BMO Capital Markets. "Total capital expenditures are expected to jump 27 per cent this year, a similar pace to that seen in the prior two years, with resource industries leading the way. Major private-sector projects include the Vale nickel processing plant, development at Voisey's Bay, maintenance work at Terra Nova and further development of the Hebron offshore oil platform."
"Even with some expected slowing in oil production, capital investments, particularly in the resource and construction sectors this year, will continue to benefit our commercial customers," said Jim Moores, Commercial Banking Area Manager, Newfoundland & Labrador, BMO Bank of Montreal. "In communities across the province, entrepreneurs are demonstrating a solid level of optimism and small businesses are a strong source of strength."
Oil production is set to fall further this year given that offshore output has peaked until Hebron is on stream later in the decade. Additionally, Terra Nova will be shut down for 21 weeks of maintenance.
Other underlying economic trends in the province are mixed. Employment was up just 0.1 per cent year-over-year in the first quarter, down from a 5.7 per cent year-over-year pace a year ago. Construction employment remains robust (up 13 per cent year-over-year), but employment in trade and transportation & warehousing continue to weaken. The jobless rate has edged back up to 13 per cent from a record (back to 1976) low of 11.3 per cent in April 2011.
The provincial government is projecting a $258 million deficit (about 0.8 per cent of GDP) for fiscal 2012-2013, down from a $776 million surplus last fiscal year, as Atlantic Accord payments wind down and oil production drops, cutting revenues. "The Province will slip deeper into deficit in fiscal 2013-2014 ($433 million), before returning to surplus in fiscal 2014-2015," Noted Mr. Kavcic.
The full Provincial Monitor can be downloaded at www.bmocm.com/economics.
About BMO Financial Group
Established in 1817 as Bank of Montreal, BMO Financial Group is a highly-diversified North American financial services organization. With total assets of $538 billion as at January 31, 2012, and more than 47,000 employees, BMO Financial Group provides a broad range of retail banking, wealth management and investment banking products and solutions.