Atlantic Canada economic prospects improves, resources assist - RBC9/11/2012
TORONTO (miningweekly.com) – The Royal Bank of Canada (RBC) said it expected a sizeable drop in oil and gas extraction output - the largest contributor to the gross domestic product (GDP) in Newfoundland and Labrador on an industry basis - would slow economic growth substantially to 1.5% this year, down from 3% in 2011.
The RBC on Monday stated in its latest ‘RBC Economics Provincial Outlook’ report that maintenance work at two significant oil fields contributed to a decline of 10.5% in crude oil production in the first half of the year, driving GDP growth lower.
As both fields resume operation, RBC anticipated a rebound in oil production in 2013. This rebound, along with metals-mining production booming in the province, was expected to lead to the real GDP growing much faster at 3.3% in 2013.
Solid gains in Newfoundland and Labrador's exports of industrial goods more than offset recent declines in energy exports, and drove overall nominal exports for the province higher by 13% year-to-date.
Iron-ore exports increased nearly 18% through June, while machinery and equipment exports increased more than ten-fold in the second quarter following four consecutive yearly declines.
"We expect production to ramp up at mining sites in Newfoundland and Labrador, including the direct-shipping iron-ore project, which should support further gains in mineral output in 2013. With all oil fields back in operation by then, the province's exports will be firing on all cylinders,” RBC senior VP and chief economist Craig Wright said in a statement.
The proposed $5-billion transportation link for iron-ore producers and a $3.1-billion investment in Alderon Iron Ore, RBC said it expected that business capital investment would also continue to support growth in the province in the years ahead.
Although employment has retreated from an all-time high in the spring, RBC expected job gains would improve and post a 1.7% gain in 2012. “Both consumers and businesses will keep Newfoundland and Labrador's domestic economy humming in 2013,” RBC said.
The bank also said it expected increased spending on significant capital projects and a full year of natural gas production at Deep Panuke from next year, to lead to an acceleration in Nova Scotia's economy in 2013.
New Brunswick was expected to yield Atlantic Canada's lowest economic growth rate this year, with real GDP growth forecast to reach 1%. RBC said Prince Edward Island was to see the strongest economic growth in Atlantic Canada in 2012, enjoying a solid run in its export sector and continued resilience within the province. Overall performance in the province would maintain a moderate pace, with real GDP growth of 1.8% this year.
After posting its largest deficit in almost two decades in 2009/10, the New Brunswick government set out an ambitious plan to balance its books by 2014/15. This plan generated the first spending cut in 11 years in 2011/12.
Despite the persistent economic uncertainty thus far this year, RBC's outlook for New Brunswick in 2013 was expected to brighten.