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BMO Bank of Montreal

December 07, 2011 10:16 ET

BMO Economics: PEI Economy Supported by Population Growth

- Population growth tops 2 per cent year-over-year

- Real GDP growth of 1.7 per cent in 2011; 1.4 per cent in 2012 (Canada's at 2.3 per cent in 2011; 2.0 per cent in 2012)

CHARLOTTETOWN, PRINCE EDWARD ISLAND--(Marketwire - Dec. 7, 2011) - Strong population growth in PEI is supporting the PEI economy, according to the Provincial Monitor report released today by BMO Economics.

"Population growth has been one recent area of strength in the province, topping 2 per cent year-over-year in August for the first time since 1980," said Robert Kavcic, Economist, BMO Capital Markets. "The Provincial Nominee Program - where the Province has the opportunity to nominate individuals likely to make a positive contribution in PEI to Citizenship and Immigration Canada - has been particularly successful in attracting international migrants."

The report predicts that PEI's real GDP is set to rise 1.7 per cent this year before cooling slightly to 1.4 per cent in 2012, mainly as a result of a downshift in public-sector capital spending.

"Businesses in the province continue to be cautiously optimistic and make targeted business investments to strengthen their productivity and future growth prospects," said John Duff, Commercial Area Manager, New Brunswick and PEI, BMO Bank of Montreal. "The U.S. economy and elevated loonie remain a top concerns for many businesses, particularly those directly or indirectly tied to the tourism industry."

After strong 3.1 per cent growth in 2010, employment was 1.2 per cent above year-ago levels through October. Public-sector growth has led but the private sector has lagged as trade has been particularly weak. Employment in the accommodation & food services sector was also up a decent 3.3 per cent year-over-year through October. However, a still-cautious U.S. consumer and elevated loonie could have a negative impact on tourism activity. At 11.1 per cent, the province's jobless rate is about in-line with the average seen over the past five years.

Public-sector capital spending has leveled off in 2011, and is expected to fade more significantly in 2012. PEI's latest five-year capital plan calls for a net $124 million in fiscal 2011-2012, about in line with the prior year's total. However, capital spending will fall to $87 million in fiscal 2012-2013, which will weigh on economic growth next year.

The PEI Government has indicated that it remains on track for a return to balanced budgets in 2013/2014. The most recent Budget forecast a shortfall of $42 million this fiscal year (0.8 per cent of GDP), which falls to $30 million next fiscal year before achieving balance in fiscal 2013-2014.

The full Provincial Monitor can be downloaded at www.bmocm.com/economics.

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