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BMO Financial Group

June 22, 2010 09:00 ET

New Brunswick Poised for Growth After Mild Recession: BMO

- Steady economic growth of 2.5 per cent and higher expected over next two years

- Major capital projects underway including $1.6 billion dollar investment from provincial government

FREDERICTON, NEW BRUNSWICK--(Marketwire - June 22, 2010) - After a relatively mild recession, the New Brunswick economy is poised to grow 2.5 per cent in 2010 and 2.6 per cent in 2011, according to the Provincial Outlook report from BMO Capital Markets Economics (TSX:BMO)(NYSE:BMO).

"Major capital projects like the Point Lepreau nuclear plant upgrade and Canaport LNG terminal were key supports during the recession, but those projects have wound down," said Robert Kavcic, Economist, BMO Capital Markets. "This will temper the boost provided by the two-year, $1.6 billion capital investment program currently being undertaken by the provincial government, of which about half will be deployed in fiscal 2010/11."

Despite a recent bounce back, the strong loonie and sluggish U.S. demand will weigh on exports and manufacturing activity. However, a sturdy job market and the positive impact of income tax reductions should help support consumer activity - retail sales were up a solid 8.9 per cent year-over-year in the first quarter.

The Province of New Brunswick is projecting a $749-million budget deficit in fiscal 2010/11 (2.8 per cent of GDP) as it increases spending and capital investment, and continues to implement its tax-reduction program. The Province plans to return to a small surplus by fiscal 2014/15. Deficits include pension-related expenses, which total $200 million in fiscal year 2009/10 before gradually shrinking to zero by the end of the forecast horizon.

An overhaul of the Province's tax system continues to go forward as planned. All personal tax rates will fall again in 2010, ultimately bottoming out in 2012. In total, the tax cuts will cost $258 million in fiscal 2010/11, rising to $380 million by fiscal 2012/13.

The complete report can be found at www.bmocm.com/economics.

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