TORONTO, Dec. 12, 2013 /CNW/ - Atlantic Canada is on track for modest
growth in 2014, according to the latest RBC Economics Provincial Outlook released today.
A significant rebound in Newfoundland and Labrador's oil and gas sector that emerged this past summer is expected to fuel
real GDP growth to a robust 6.0 per cent pace in that province in 2013.
"Following a sharp pullback in production resulting from maintenance
shutdowns in the summer of 2012, oil production in the province was up
21 per cent in the first 10 months of the year," said Craig Wright,
senior vice-president and chief economist, RBC. "In the absence of a
similar lift to economic activity next year, we expect Newfoundland and
Labrador's real GDP to grow at a much slower pace of 1.5 per cent in
RBC notes that elevated levels of capital investment are expected to
more than offset a crude oil production pullback in 2014 - engineering
is underway on the West White Rose extension, and construction related
to the Hebron offshore project will churn on. With the anticipated
start-up of the South White Rose Extension, RBC says crude oil
production gains could resurface at the end of next year.
RBC notes that despite volatile commodity prices, iron ore has shown
resilience with prices and volumes rebounding following uncertain
conditions earlier in the year; nominal exports of the metal are on
pace to surpass 2012 levels, and have offset the notable declines in
copper and zinc exports. A ramp up in production at the second
expansion phase for the Iron Ore Company of Canada and at the Direct
Shipping iron ore project will set the sector on pace for overall
improvement in 2014, RBC says.
The provincial government vowed to cut program spending by 0.2 per cent
and 0.9 per cent in the next two years, respectively, following a 1.5
per cent rise in 2013-2014. RBC anticipates the drag from this fiscal
restraint will be further amplified by weaker public employment, though
the private sector will pick up the slack with overall employment
expected to rise by 1.5 per cent annually throughout the forecast.
"Advances in major projects along with positive oil exploration
developments are expected to counterbalance rising challenges facing
the domestic portion of the economy," added Wright. "We expect a modest
1.7 per cent GDP growth rate in 2015."
Following a disappointing contraction (albeit marginal) in 2012, Nova Scotia's economy is expected to close 2013 with a growth rate of 1.2 per cent
thanks in large part to the ramp up in production from the Deep Panuke
offshore natural gas field, RBC says. A full year of production at the
field will offset maturation-related declines at the Sable Island field
and support provincial growth of 2.1 per cent in 2014. RBC expects 2.3
per cent growth in 2015.
Deep Panuke started production this past summer and registered a notable
pick-up in the fall - RBC expects this to accelerate further into 2014.
Year-to-date production, however, remained 24 per cent below the
corresponding 10 months in 2012 due to significant maturation-related
declines at the Sable Island field. Still, RBC notes that this did not
negatively impact the province's overall exports.
"The long-anticipated natural gas production lift from Deep Panuke will
likely mark a turnaround for Nova Scotia," said Wright. "With U.S. auto
sales expected to gain momentum in 2014, elevated demand for the
province's largest export - rubber tires - alongside rising production
at Deep Panuke, will support continued improvement in provincial
RBC says the recent approval of the $1.5 billion Maritime Link project
is also a positive development for Nova Scotia's economic growth. The
provincial economy will be further propelled by energy sector
developments, with Shell recently completing seismic testing and
British Petroleum set to begin its seismic program in 2014.
Prospects for stronger overall economic performance are being weighed
down by deterioration in Nova Scotia's labour market. Weakness has
permeated throughout the private and public sector, and the province
faces an overall pullback in employment in 2013. A surge in
self-employment, however, will temper the decline to a mild 0.2 per
cent, RBC says.
"Soft job prospects have done little to slow consumer spending, though a
delayed HST reduction could soften the retail sales rally in 2014,"
Prince Edward Island's economic performance was dampened by softness in the province's exports in the first half of
the year, offsetting robustness in the domestic drivers of growth; RBC
projects the province will grow at a modest 1.2 per cent in 2013.
However, RBC sees a rotation emerging in 2014 with the domestic economy
levelling off and demand for the province's export goods supporting a
slightly quicker 1.4 per cent pace in 2014. Looming demographic
challenges and a drag from fiscal restraint are expected to slow real
GDP to 1.1 per cent in 2015.
"Following robust performance in 2012, export growth has softened in
2013 though overall goods exports edged out a positive, albeit small,
gain in the first nine months of the year," said Wright.
Annual potato production gains reached a seven-year high in 2013; this,
coupled with supportive demand conditions, renewed export strength for
the frozen variety of the vegetable after a sluggish start to the year.
Nominal exports of the fresh vegetable fell due to softer prices
relative to the same period in 2012. Aerospace exports also took a
tumble as uncertainty in the U.S. likely held back orders. RBC expects
a retracement of the aerospace decline and continued robust gains for
the province's seafood products will be the main drivers in 2014.
"The recently announced Comprehensive Economic and Trade Agreement
between Canada and the European Union is expected to support long-term
export performance in the province, and with the ratification of the
deal expected in 2015, any positive lift caused by exports offers
upside potential to PEI's 2015 growth prospects," added Wright.
Following its disappointing performance in 2012, RBC expects New Brunswick's economy to continue to face economic challenges as weakness in energy
exports has largely impeded the export-oriented growth recovery. RBC is
forecasting a minimal 0.3 per cent real GDP growth in 2013. Looking
ahead, renewed strength in mining provides some room for improvement;
however, domestic headwinds, including fiscal restraints, will likely
temper growth to a tepid 1.0 per cent and 1.4 per cent real GDP growth
in 2014 and 2015, respectively.
"Despite vigorous demand for the province's lumber exports, weakness in
energy, potash and metals exports is causing New Brunswick's
international trade balance to deteriorate this year," added Wright.
"We anticipate stronger performance from the mining sector next year
with the start-up of new Bathurst mining operations, and assuming price
pressures are contained, the Sussex Potash expansion is expected to
provide a more sizeable lift to the industry in 2015."
New Brunswick's second-quarter budget update and public accounts
revealed the government is struggling to maintain its fiscal trajectory
set out in its budget earlier this year; weaker-than-expected revenues
have pushed the deficit to a larger $538 million estimate in 2013-2014.
RBC believes restraints on provincial government spending will be
maintained and will continue to weigh down economic growth.
"New Brunswick's domestic economy is struggling to regain traction with
most indicators, such as retail sales and housing starts, tracking
close to or below year-ago levels," added Wright.
Private-sector employment has sustained an upward trend in 2013, though
a continued moderation in public-sector employment has provided some
offset. Despite these challenges, RBC expects the province will edge
out its first positive year-over-year employment growth in five years
in 2014 as activity in export-oriented sectors picks up and spurs
With the completion of the Sussex Potash expansion expected in 2013 and
the ramping up of construction on the Sisson Brook mine not expected
until 2015, RBC says business investment will likely slow in 2014.
While New Brunswick's near-term prospects remain soft, the proposed
east-west pipeline could begin to heat things up over the medium term,
providing a confidence boost to the province by 2015, RBC says.
The RBC Economics Provincial Outlook assesses the provinces according to
economic growth, employment growth, unemployment rates, retail sales,
housing starts and consumer price indices. The full report and
provincial details are available online as of 8 a.m. ET today at rbc.com/economics/economic-reports/provincial-economic-forecasts.html.
For further information:
Craig Wright, RBC Economics Research, 416 974-7457
Laura Cooper, RBC Economics Research, 416 974-8593
Elyse Lalonde, Communications, RBC Capital Markets, 416 842-5635