ST. JOHN’S, N.L. – A stronger U.S. economy and weaker loonie should help exporters, says the Atlantic Provinces Economic Council in a new report that predicts modest growth throughout the region next year.
But the independent think-tank’s annual economic outlook released Monday also warns of global factors that could wipe out even those projected gains.
“Aside from geopolitical tensions, the potential for a renewed recession in the euro area and increased financial volatility as U.S. monetary policy begins to tighten are significant risks to growth in 2015,” it says.
Nova Scotia is expected to lead the pack, with gross domestic product forecast to grow about 1.9 per cent as spending ramps up for the federal shipbuilding project.
In New Brunswick, the report says government capital spending will contribute to a projected GDP increase of 1.7 per cent.
Growth in Newfoundland and Labrador and P.E.I. is predicted at 1.5 and 1.4 per cent, respectively.
Consumer spending is likely to remain modest across the region as job creation stalls, says the report. Sluggish housing starts are also expected.
“Overall growth is still fairly subdued,” David Chaundy, the council’s senior economist, said from Halifax.
“There are still a lot of key risks around the global economy and things that could impact that forecast as the year plays out.”
Those variables include violence in the Middle East, instability in Ukraine and economic uncertainty in Europe, Chaundy said.
“There’s a lot of risks that could see those forecasts go higher in some cases, but certainly more likely to go down if some things don’t work out quite as we had assumed.”
Higher natural gas production in Nova Scotia will help drive up GDP growth by about 1.6 per cent this year but its housing market continues to weaken, says the report. Starts were down 26 per cent from last year as of September.
Expected growth in New Brunswick next year is propelled by increased exports and more government spending on capital projects, says the report. It cites lumber exports to the U.S.— up 13 per cent over last year as of August — as U.S. housing starts are expected to jump by 25 per cent next year.
Chaundy said the region’s heavy reliance on commodities with fluctuating prices adds to the unpredictability.
“One of the key things that stands out is we are still quite dependent on resources. We see this in particular in Newfoundland and Labrador.”
A projected decline in GDP of 0.8 per cent this year for the province is mostly due to a drop in oil and mining output, Chaundy said.
Sharon Horan, chairwoman of the St. John’s Board of Trade, stressed the importance of controlled spending. The province counts on the offshore oil sector for about one-third of government revenues. It anchored its last budget on a projected average price of US$105 a barrel.
“We just need to be certain that we budget conservatively and spend within our means,” Horan said.
Brent crude was trading Monday for just over US$84 a barrel. It costs the provincial treasury about $30 million for each dollar the average price winds up below the budgeted forecast.
Newfoundland and Labrador was $388.6 million in the red for 2013-14, its third straight deficit budget.
Still, Horan said housing prices and high wages, especially in the St. John’s region, have held as major project investment in the province has reached record levels.
“We’re very optimistic that we continue to have a bright future ahead.”
KEY FIGURES IN A NEW REPORT BY THE ATLANTIC PROVINCES ECONOMIC COUNCIL ON THE ECONOMY IN THE REGION FOR THIS YEAR AND NEXT:
Newfoundland and Labrador: Real GDP growth is forecast to decline 0.8 per cent this year as oil and mining output drop. The economy is forecast to grow by 1.5 per cent in 2015.
Prince Edward Island: Growth remains steady at 1.3 per cent this year, driven by gains in tourism and exports. Real GDP is forecast to grow 1.4 per cent next year.
Nova Scotia: Real GDP is forecast to be about 1.6 per cent this year because of higher natural gas production. The the start of production on the federal government’s shipbuilding program is mainly behind next year’s growth forecast of about 1.9 per cent.
New Brunswick: Modest economic growth of one per cent is forecast for this year, but is projected to improve to 1.7 per cent next year through increased exports and government capital spending.
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