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FREDERICTON, June 25, 2009 – Although the New Brunswick economy faces weakness on the commodity price and export fronts, still-strong capital investment has buffered the downturn, according to the Provincial Outlook report from BMO Capital Markets Economics.

“Real GDP will likely contract a better-than-average 1.3 per cent this year in the province, before rebounding 1.7 per cent in 2010,” said Robert Kavcic, Economist, BMO Capital Markets.

A number of major capital projects like the $1.4 billion Point Lepreau nuclear plant upgrade and $2 billion Canaport LNG terminal have helped keep the province's labour and housing markets relatively steady in the face of weak U.S. export demand, particularly in forestry. “New Brunswick has not lost any jobs since the start of 2008,” said Kavcic. “However, a number of these important projects are winding down, removing key pieces of economic support.”

Other construction projects and a two-year, $1.2 billion government infrastructure spending program should help fill most of the void heading into 2010. At the same time, a restructuring of the tax system will provide $144 million in tax savings in fiscal 2009/10, rising to $380 million by fiscal 2012/13. “This will come in the form of both personal and general corporate tax cuts, the latter of which will lead to the lowest rate in Canada by 2012,” noted Kavcic.

Against this backdrop, the Province of New Brunswick is projecting a significant widening of its budget deficit to $741 million in fiscal 2009/10. This marks the largest budget deficit as a share of GDP (2.7 per cent) since fiscal 1987/88, but is accompanied by a plan to return to balance in four years.

The complete report can be found at www.bmocm.com/economics.

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