The Maritimes: Go east, young man?

Suddenly, Nova Scotia and New Brunswick are dynamos. Relatively speaking.

Nova Scotia and New Brunswick boast the two largest economies in the Maritimes, but don’t exactly get much of the spotlight on a national scale. Alberta has the oil, Ontario has the banking and auto plant jobs, and B.C. and Quebec have much of the remaining manufacturing output. But if you’re looking for islands of resiliency during the economic downturn this year, the two Maritime provinces are about as good as it gets in Canada.

RBC Economics estimates Nova Scotia will see economic growth of 0.8% in 2009; New Brunswick is set for a 1.2% gain. Those are down from 1.2% and 1.6%, respectively, in 2008. But both provinces look set to outpace overall GDP growth in Canada of 0.6% in 2008 and zero in 2009, and besting Ontario, Quebec and B.C. Both eastern provinces are also forecast to outpace national increases in employment and retail sales. “We are looking out for economic weakness in Nova Scotia and New Brunswick, but they’ll lightly outperform the national average,” says Paul Ferley, assistant chief economist with RBC.

Sure, N.S. and N.B. will suffer along with the rest of Canada, thanks to weak commodity prices, lower U.S. demand for Canadian exports and the continuing credit crisis, which will adversely impact project financing for major capital investments. “We’re talking about a fairly weak economic environment [across Canada], resulting from weak growth in the U.S.,” says Ferley. Both provinces are heavily export-oriented and face sustained mine shutdowns, as well as continued weakness in the forestry sector.

Yet two factors contribute to the provinces’ relative stability. For one thing, while commodity prices are down, they are still high by historical standards, and New Brunswick and Nova Scotia will benefit from that. (For example, PotashCorp. of Saskatchewan has been expanding a potash mine in New Brunswick.)

Meanwhile, both provinces have benefited from some big capital projects. In Nova Scotia, work is continuing on the offshore Deep Panuke natural gas project and expected to peak this year, providing a boost in investment and construction activity; the first gas is expected to flow in late 2010. Other big projects include a container terminal in the Melford Industrial Reserve and the multi-hundred-million-dollar clean-up of the Tar Ponds in Sydney, N.S.

New Brunswick’s major projects are coming to a close, including construction on the Canaport LNG liquefied natural gas terminal. And though the timing is uncertain, Irving Oil is expected to add a second oil refinery to Saint John in the not-too-distant future — a massive undertaking that would cost $7 billion and create up to 5,000 construction jobs over four years. Meanwhile, refurbishment work is expected to continue apace on the Point Lepreau nuclear plant.

To be sure, beating the rest of Canada in growth is a bit of a booby prize: in the five years through 2007, Nova Scotia and New Brunswick averaged an anemic 1.4% and 1.9% GDP growth, below the Canadian average of 2.7%. Employment growth in both provinces averaged 1.1% in that time, compared with 2% across Canada. “We’ve not had the boom” of other provinces, “but we’ve not had the bust,” says David Chaundy, senior economist with the Atlantic Provinces Economic Council, an independent think-tank based in Halifax. He points out that the Maritimes have not been as tied as other provinces to growth sectors like oil (Alberta) or autos (Ontario). “Now that those are in reverse, we don’t look so bad,” he adds. “I wouldn’t say New Brunswick or Nova Scotia are strong. They’ve not had the strong growth we’ve seen in Western Canada or Ontario — nor, when the economy is going down, the declines, either.”

Er, take that, Ontario.