Newfoundland and Labrador’s economy is predicted to shrink 0.4 per cent this year, according to a new report from the Atlantic Provinces Economic Council.
The council released its annual economic outlook for the Atlantic provinces in Saint John, N.B., Thursday, predicting a mixed year ahead for the East Coast.
While major project spending in the region is expected to decline, exports will benefit from “increased output in key sectors” next year, says the report.
The council lays the blame for Newfoundland and Labrador’s contraction on reduced oil production that offset increased capital investment in 2012.
It’s the worst performance of the provinces in the report, with slow growth of one per cent forecast in 2012 for both Nova Scotia and New Brunswick, and 1.6 per cent in Prince Edward Island.
Declining oil production due to maintenance this year has been a factor in all major economic forecasts, but most predicted slight growth for Newfoundland and Labrador.
As late as September, RBC’s economic outlook predicted the province would grow 1.5 per cent in 2012. Last year at this time, in fact, the council itself predicted growth of 1.1 per cent in the province in 2012.
David Chaundy, senior economist with the council, said it’s a reflection of the importance of oil to the provincial economy, and previous forecasts might not have captured “the full degree of that decline” in oil production this year.
“The overall economy in Newfoundland is growing,” he said. “You look at retail sales, you look at employment, you look at a lot of other indicators, the economy is doing well.
“But oil is a big part of the Newfoundland economy, and we’ve got a very sharp contraction in oil production, down about 24 per cent in the year to August.”
The council’s report also predicts 2013 will see Newfoundland and Labrador have the strongest rebound thanks to recovering oil production and continued mining investment.
The report forecasts growth of 3.4 per cent for the province next year, at least twice the rate of economic growth predicted for any of the Maritime provinces.
“We are expecting those fields to come back on stream the end of this year, so we’re going to have production at full capacity next year,” said Chaundy.
“There’s some natural decline in those fields, so we are predicting a six per cent increase in oil production, so certainly that is one key. We’re also expecting on the mining side that investment and production to continue to increase.”
However, the council is expecting to see less investment in major projects, as some current projects near completion, which will offset mining and oil growth.
Representatives from the council are making presentations of the report in the Atlantic Provinces over the next few days.
After releasing the report in New Brunswick on Thursday, the council heads to Prince Edward Island for a presentation Friday, and will present its report in St. John’s on Monday morning at its Business Outlook conference at the Delta hotel.