HALIFAX, NOVA SCOTIA--(Marketwire - May 3, 2012) - Economic growth in Nova Scotia is poised to pick up, as the Federal shipbuilding contract will boost activity for years to come, according to the Provincial Monitor report released today by BMO Economics. The contract landed by Irving Shipbuilding to build combat ships for the Royal Canadian Navy is worth an estimated $25 billion through 2030. As a result, while real GDP will likely grow at a still-modest 1.8 per cent pace this year, this will accelerate to 2.4 per cent in 2013 when shipbuilding activity picks up.
"The Conference Board of Canada estimates that about 8,000 new jobs - or more than 1 per cent of total employment in the province - will be sustained over that period, and that real GDP will see a boost of about $800 million per year on average," said Robert Kavcic, Economist, BMO Capital Markets. "While the exact timing of building is still not certain, we've assumed that some activity will be underway by 2013."
While clearly positive for the Nova Scotia economy, the massive project is not without challenges. Among these is the availability of skilled labour, some of which has already migrated to more lucrative labour markets in Western Canada.
"The widespread economic activity that will grow out of this shipbuilding contract will fundamentally transform the province over the next 20 years," said Laura Charlton, Vice-President, Nova Scotia District, BMO Bank of Montreal. "With growth opportunities extending well beyond the direct employment of labour, trades, and professionals, to the anticipated demands for increased business related services, housing, commercial and industrial construction, retail development, and a vast spectrum of manufacturing, local entrepreneurs are optimistic. With extensive planning well underway, the local business leaders we speak to say they are up to the task of overcoming the challenges ahead, including sourcing essential labour. In many ways they see it as a challenge they can't wait to overcome."
Elsewhere, construction of Encana's $800 million Deep Panuke natural gas project is expected to boost total exports in 2012, with production beginning sometime after midyear.
Public-sector investment is slowing as stimulus spending retreats, and public capital expenditures are expected to grow just 2.1 per cent this year after robust 9.9 per cent growth in 2011.
The labour market has performed decently in recent months, with employment rising 1.1 per cent year-over-year in the first quarter as both the public and private sectors have seen growth. "The jobless rate sat at 8.3 per cent in March, down from more than 10 per cent at the end of 2010 and now by far the lowest in Atlantic Canada," noted Mr. Kavcic.
The provincial government is projecting a $211.2 million budget deficit in fiscal 2012-2013, or 0.5 per cent of GDP. "With the financial crisis and fiscal repair largely in the rear-view mirror, Nova Scotia is now looking ahead to a more favourable economic climate and a balanced budget," stated Mr. Kavcic. "The Province continues to target a $15.4 million surplus in fiscal 2013-2014, leaving it in a position to reverse recent HST increases in 2014 and 2015 if the fiscal situation allows it to do so."
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.