BMO Financial Group

BMO Financial Group

January 17, 2013 10:00 ET

BMO Economics: Newfoundland & Labrador to Lead Canada in Economic Growth in 2013

- Jobless rate near a record low

- Real GDP growth of 4.5 per cent expected in 2013 (Canada's expected to be 1.7 per cent)

ST. JOHN'S, NEWFOUNDLAND AND LABRADOR--(Marketwire - Jan. 17, 2013) - Newfoundland & Labrador's economy is expected to rebound in 2013 as oil production improves and investment activity remains robust, according to the Provincial Monitor report released today by BMO Economics. Real GDP growth is expected to lead the country in 2013 with a rate of 4.5 per cent.

"Construction and capital investment activity have been key economic drivers in the province in recent years, and growth continues at a strong clip," said Robert Kavcic, Senior Economist, BMO Capital Markets. "Major capital projects are ongoing in the iron ore sector, such as Vale's nickel processing facility at Long Harbour; the offshore oil sector, including the Hebron project which was confirmed by Exxon Mobil in recent weeks; and the development of Muskrat Falls."

Underlying economic trends in the province are solid. "The jobless rate ended 2012 near a record low at 11.5 per cent, spurred by the fastest pace of job growth in the country at 3.7 per cent year-over-year in December," stated Mr. Kavcic. "Average weekly earnings rose a heated 5.7 per cent year-over-year through October, supporting consumer spending."

"Across the province we are seeing solid business growth in construction and capital investments and 2013 should be a good year for business growth and employment opportunities," said Jim Fallon, District Vice President, Newfoundland & Labrador, BMO Bank of Montreal. "Entrepreneurs are also showing a solid level of optimism and small businesses continue to be a strong source of strength."

Offshore oil production was down in 2012 as a maintenance shutdown at Terra Nova exacerbated a broader trend of declining output. "Output should bounce back this year, although the longer-term trend remains downward given that overall output has peaked and won't rise until Hebron comes on stream later in the decade," noted Mr. Kavcic.

The Province of Newfoundland & Labrador revised its deficit forecast steeply to $723 million in fiscal 2012-2013, or just over 2 per cent of GDP, from $258 million projected in the budget. While not totally unexpected given the weaker oil price environment, the downgrade was quite steep, and leaves the deficit in Ontario's neighbourhood as a share of GDP. Total revenues are now tracking nearly $490 million (6.8 per cent) below the budget forecast, with oil royalties slicing $436 million from the total (Brent crude is now forecast at $109.53 vs. $124.12 in the budget).

The full Provincial Monitor can be downloaded at

About BMO Financial Group

Established in 1817 as Bank of Montreal, BMO Financial Group is a highly diversified North American financial services organization. With total assets of $525 billion as at October 31, 2012, and more than 46,000 employees, BMO Financial Group provides a broad range of retail banking, wealth management and investment banking products and solutions.

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