Wade Locke, the head of the Memorial University economics department, said the provincial budget will likely make a bad economy worse, and the federal budget will have bigger fish to fry.
All in all, Locke said the economic situation is dire.
“I think it’s as bad as I’ve ever seen it, and I’ve been here 32 years,” he said.
“The problem is, there’s no easy solution.”
With the federal budget, Finance Minister Bill Morneau is likely to be more focused on the big picture, Locke said.
“It’s more the macro economy, and that means, basically, Ontario and Quebec,” he said.
Doug May, another MUN economist, said it’s possible there may be a few tidbits, but he was also skeptical about Ottawa riding in to the rescue.
“As for the federal government, they will be quietly trying to help the province through, say, joint infrastructure projects, but their ability to manoeuvre at present is limited because of the deficit/debt challenges,” May said.
But if the economists expect the federal budget to be largely benign but unhelpful to Newfoundland and Labrador, they’re downright worried about the provincial budget.
Currently the government is running a deficit of about $1.6 billion, and Finance Minister Cathy Bennett has signalled her deficit target for the coming year is $800 million or less.
Since Premier Dwight Ball has said there will be no tax hikes or increased fees, that means hundreds of millions of dollars’ worth of spending cuts.
With a huge portion of government spending devoted to salaries, that basically means job cuts, at a time when megaprojects such as the Hebron oil rig are winding down.
The government makes up a large portion of the overall labour force in Newfoundland and Labrador — the province has the biggest civil service per capita in Canada by a significant margin.
But Locke said if the government doesn’t make deep cuts now, it will be forced to make big cuts later.
“We’ve got a problem with borrowing because right now our credit rating is one of the lowest in the country, and (if) we don’t hit our budget targets that’s likely to be reduced yet again,” he said. “That will effectively squeeze us out of some markets that we can borrow in.”
Lynn Gambin, an associate professor in economics at MUN who studies labour markets, said the province is particularly susceptible to feeling the effects of the boom-and-bust cycle of megaprojects because of a small population, and not a lot of ability to soften the blows.
“There are other industries in the province that can help to make up some of the losses that we will have when these megaprojects decline. But things like software development and the technology sector, they are growth sectors, but they’re kind of a slow burn,” Gambin said.
“The issue there is that they don’t get the big increase in employment immediately, so it’s a longer track thing.”
Gambin said if provincial government forecasts hold true, and unemployment rises to nearly 20 per cent in the next few years, people leaving the province will be a serious concern.
“Given our population and the aging structure of it, it is something that is important,” she said.