The Newfoundland and Labrador economy is being held up by high spirits, while oil revenues drop, according to a report released Wednesday by the Royal Bank of Canada.
The growth of the province's real gross domestic product (GDP) is forecasted to be a negligible 0.2 per cent over this year.
The provincial government was predicting a decrease in GDP for 2008, so Finance Minister Tom Marshall says he was pleased to see that the report is predicting a slight growth.
"We thought we were going to have a negative GDP of about two per cent because of the decline in oil production, but a much stronger domestic economy as well as higher than expected oil production will likely give rise to a revised forecast that is much stronger than was indicated at budget time," Marshall says.
"Last year was the high in terms of oil production, and it's now going to drop, and so now we're looking at negligible growth, but still growth, and on top of 9.1 (per cent last) year, we're coming off a big base," Marshall says.
While the province led the country with a real GDP growth of 9.1 per cent in 2007, a significantly slower predicted increase this year puts Newfoundland and Labrador second to last in growth, just above Ontario.
Saskatchewan will likely lead the country for economic growth in 2008, according to the report.
The GDP is being kept up by high consumer spending, according to Craig Wright, the senior vice-president and chief economist of the Royal Bank of Canada (RBC).
"Record oil prices, steady declines in unemployment, tax cuts and the announcement of a go-ahead deal on the Hebron offshore project have given consumers a boost in confidence," Wright said in a release.
Consumer spending has seen two years of high growth, despite the cost of food and other necessities continuing to increase at a higher rate. Retail sales are projected to continue a moderate increase in 2009.
Housing starts in the province are projected to continue their increase up to 3,000 units in 2009.
The positive attitude is reflected in the St. John's business community, according to Donna Stone, president of the Board of Trade.
She says in a recent membership survey nearly 95 per cent of businesses said they thought local economic conditions were 'good' or 'excellent.'
Unemployment rates are expected to slowly drop down below 13 per cent next year, while remaining the highest in the country.
Marshall says the unsteady growth rates of the economy, and the crisis in international markets make it a challenge to predict and manage the province's finances.
"We have to make sure the spending we do is sustainable. Given the fact that our oil revenues and mineral revenues are plummeting we have to make sure we're very careful and prudent in our spending," Marshall says.
"Obviously, we're impacted by what is happening in the world, and in particular in the U.S. and again, if the slow down deepens, if it lasts a long time, it's going to affect us in an adverse way," Marshall says.
The provincial government's current forecast of GDP growth for 2009 is 3.7 per cent, while RBC is predicting only 1.3 per cent growth.
To lessen the effect of the economic storm, Stone suggests local businesses examine their operations and finances to ensure the best rates on borrowing costs, and identify opportunities for debt payment or consolidation.
nbell@thetelegram.com
High spirits keeping economy up
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Published on
October 9, 2008
- Published on July 1, 2010
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Nadya Bell
Consumer confidence making up for decreasing oil revenues
The Newfoundland and Labrador economy is being held up by high spirits, while oil revenues drop, according to a report released Wednesday by the Royal Bank of Canada.
The growth of the province's real gross domestic product (GDP) is forecasted to be a negligible 0.2 per cent over this year.
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