Economic growth in Nova Scotia, currently running at 1.6 percent for 2011, looks promising over the next two years, according to the Provincial Monitor report released today by BMO Economics. "We expect growth to accelerate to a 2.5 percent clip by 2013, when the positive impact of the recently announced Federal shipbuilding contract begins to take root," said Robert Kavcic, Economist, BMO Capital Markets.
The contract landed by Irving Shipbuilding to build combat ships for the Royal Canadian Navy is worth an estimated $25 billion through 2030. The Conference Board of Canada estimates that about 8,000 new jobs - more than 1 per cent of total employment in the province - will be sustained over that period, and that real GDP will see a boost of about $800 million per year on average.
"While the exact timing of building is still not certain, we've assumed that some activity will be underway by 2013, boosting real GDP growth roughly 0.5 percentage points above our previous forecast," noted Mr. Kavcic. "The announcement has already had a positive impact on consumer confidence, which posted the biggest increase in Atlantic Canada in more than two years in November."
"The shipbuilding contract announcement has already set in motion a level of planning not seen in a generation, as businesses begin to think through how they can best capitalize on the widespread economic activity that will transform the province over the next 20 years," said Laura Charlton, Vice-President, Nova Scotia District, BMO Bank of Montreal. "The growth opportunities extend well beyond the direct employment of labour, trades, and professionals, to the anticipated demands for increased business related services, housing, commercial and industrial construction, retail development, and a vast spectrum of manufacturing."
Construction activity at Encana's $800 million Deep Panuke natural gas project continues, and production is expected to boost total exports in 2012. Public-sector investment, however, is slowing as stimulus spending retreats. Indeed, overall capital spending in the province is poised to fall modestly this year after growth of 5 per cent per year in the prior two years.
While news of the shipbuilding contract has propped up confidence, consumers are still feeling the impact of last year's HST increase along with higher fuel and utility costs. Meantime, the job market has been sluggish this year, with private-sector employment 2.1 per cent below year-ago levels through November, largely due to weakness in the goods sector.
Nova Scotia's first quarter fiscal update decreased the fiscal 2011-2012 deficit estimate to $319 million (0.8 per cent of GDP), from the Budget's $390 million forecast. The Government re-affirmed its commitment to balance the budget in fiscal 2013-2014.