Skip navigation
Navigation skipped

News Releases

BMO Blue Book: Newfoundland & Labrador Economy Struggles Amid Drop in Oil Price, but Longer-Term Prospects Encouraging

- Provincial jobless rate rising, but oil prices have stabilized

- GDP contraction of 1.0 per cent expected in 2015, 1.5 per cent in 2016; Canada GDP growth expected to be 1.8 per cent in 2015, 2.2 per cent in 2016

ST. JOHN'S, NEWFOUNDLAND AND LABRADOR--(Marketwired - May 4, 2015) - Newfoundland and Labrador is struggling with the slide in oil prices and fading near-term production, but longer-term prospects are more encouraging, according to the BMO Blue Book released today by BMO Capital Markets Economics and BMO Commercial Banking.

Much like the U.S. Federal Reserve's Beige Book, the BMO Blue Book combines the expertise of BMO's economists with information on current business conditions provided to BMO's commercial bankers by local businesspeople.

"Understandably, people and businesses in Newfoundland & Labrador are showing a great deal of caution - at least in comparison to the last five years," said Carolyn Booth, Senior Vice President, Atlantic Provinces Division, BMO Bank of Montreal. "The province is still being negatively affected by the combined impact of low oil prices and falling commodity prices - particularly iron ore. Despite the lower prices, nickel production in Voisey's Bay and processing in Long Harbour continue to support the local economies in those parts of the province."

According to Robert Kavcic, Senior Economist, BMO Capital Markets, real GDP is expected to contract 1.0 per cent this year and fall a further 1.5 per cent in 2016 as oil production declines. "Longer term prospects are more encouraging, however, based on our forecast for WTI oil returning toward $70 by the end of 2016 - this should support continued development of the offshore sector."

According to the report, Newfoundland & Labrador's oil sector makes up roughly 22 per cent of provincial GDP and more than 7 per cent of employment. As a result, the slide in oil prices is expected to hit incomes hard in the province.

Production continues to drift down after peaking in 2007. It should rise again when the pipeline is filled with new output, such as Hebron in late 2017. Also, an extension of White Rose is in the engineering and design and a major discovery by Statoil in the Flemish Pass Basin could hold 300 million to 600 million barrels of light oil.

Ms. Booth noted that the best news coming out of the province is from the fisheries sector - with the lower Canadian dollar helping with exports to the U.S. and elsewhere. With no expected changes in quotas forecast for 2015 and prices remaining at 2014 levels, another positive year is expected.

Employment fell for a second straight year in 2014, and was down 2.3 per cent year over year in the first quarter. Public-sector job cuts have been the major culprit, with employment down 18 per cent from its early-2013 high education, health care and public administration have all fallen significantly. With the sluggish labour market and confidence plagued by lower oil prices, retail sales momentum had faded, while average home prices are now down from a year ago.
Ms. Booth noted that BMO's team of experts is here to help clients in the region make decisions that enable them to navigate through challenging times and make strategic investment decisions that will propel growth and drive success in the long term.
The full BMO Blue Book can be downloaded at www.bmocm.com/economics.

About BMO Financial Group

Established in 1817, BMO Financial Group is a highly diversified financial services provider based in North America. With total assets of approximately $672 billion as of January 31, 2015, and more than 46,000 employees, BMO provides a broad range of retail banking, wealth management and investment banking products and services to more than 12 million customers and conducts business through three operating groups: Personal and Commercial Banking, Wealth Management and BMO Capital Markets.

For further information:
Media Contact:
Valerie Doucet, Montreal
(514) 877-8224
valerie.doucet@bmo.com

Peter Scott, Toronto
(416) 867-3996
PeterE.Scott@bmo.com

Internet: www.bmo.com
Twitter: @BMOmedia