Gloomy outlook for Newfoundland and Labrador economy in 2015

Easing capital investment and weaker commodity prices hurting economy

OTTAWA, May 28, 2015 /CNW/ - For the second consecutive year, the Newfoundland and Labrador economy is expected to contract in 2015, as lower investment and weaker commodity prices dampen growth, according to The Conference Board of Canada's Provincial Outlook: Spring 2015.

"Newfoundland and Labrador's economy is facing a double hit of low oil prices and low metal prices, both of which are having a negative impact on business investment and production decisions," said Marie-Christine Bernard, Associate Director, Provincial Forecast. "The province's labour and housing markets and retail sales will feel the effects of the weakening economy."

HIGHLIGHTS

• Newfoundland and Labrador's economy is expected to contract by 0.1 per cent in 2015 and 0.2 per cent in 2016.
• With the provincial government projecting a $1.1-billion deficit for this fiscal year, the latest budget includes hikes in the harmonized sales tax and in personal income tax rates.
• Newfoundland and Labrador's economy shed 4,650 jobs last year, and employment is forecast to decline again this year.

After declining by 2.9 per cent last year, real gross domestic product (GDP) is forecast to contract by a further 0.1 per cent in 2015 and 0.2 per cent in 2016.

Newfoundland and Labrador's economy shed 4,650 jobs last year, and employment is forecast to decline again this year before stabilizing in 2016. Meanwhile, the unemployment rate is expected to drop from 12.6 per cent this past April to an average of 11.9 per cent in 2016 as the number of Newfoundlanders looking for work drops. With the labour market still struggling, household spending will be weak this year and next.

The provincial government can expect significantly lower revenues this year due to lower resource royalties and reduced personal income taxes. This has left the government projecting a whopping $1.1-billion deficit for the current fiscal year, thus limiting government spending.

The one bright spot for Newfoundland and Labrador is the manufacturing sector. The Long Harbour hydromet facility has begun processing nickel, copper, and cobalt ores from the Voisey's Bay mine. This will help offset some of the weakness in the offshore drilling and construction sectors.

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SOURCE Conference Board of Canada

Image with caption: "2015 economic growth by province (CNW Group/Conference Board of Canada)". Image available at: http://photos.newswire.ca/images/download/20150528_C6861_PHOTO_EN_17125.jpg

Yvonne Squires, Media Relations, The Conference Board of Canada, Tel.: [phone] ext. 221, E-mail: [email protected], or, Juline Ranger, Associate Director of Communications, The Conference Board of Canada, Tel.: [phone] ext. 431, E-mail: [email protected]