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BMO Financial Group

January 12, 2011 09:48 ET

Newfoundland & Labrador Economy to Continue Posting Impressive Growth, Says BMO Economics

Construction Activity Will Be Biggest Economic Driver for Next Two Years

ST. JOHN'S, NEWFOUNDLAND AND LABRADOR--(Marketwire - Jan. 12, 2011) - Newfoundland & Labrador likely led the country in real GDP growth in 2010, according to the Provincial Monitor report issued today by BMO Capital Markets Economics. 

"The expected 4.5 per cent growth rate for 2010 should remain firm at 3.9 per cent in 2011 as the stimulus tap remains open," said Robert Kavcic, Economist, BMO Capital Markets.

The biggest economic driver in the province in the next two years will be construction activity. Government infrastructure spending is on pace to total about $1 billion in fiscal 2010/2011 (more than 3 per cent of GDP), helping boost total capital spending an expected 23 per cent in calendar 2010. "Provincial government infrastructure spending will amount to more than $5 billion over the next several years, keeping that engine of economic growth running into 2012," said Jim Fallon, District Vice-President, Newfoundland & Labrador, BMO Bank of Montreal. "Non-residential building permits issued over the past twelve months have hit a record level."

Offshore oil output was up a modest 2.9 per cent through September, while higher mineral output also likely added to 2010 growth—this includes a rebound at the strike-plagued Voisey's Bay nickel mine last year. Helped by strong commodity prices, private-sector capital spending on projects such as Long Harbour (nickel processing), Hibernia South (offshore oil) and Hebron (offshore oil) should add to the robust level of public-sector spending in the next two years.

Other underlying economic trends remain solid in the province, particularly in the labour market. "Employment was up 5 per cent year-over-year in the fourth quarter helped by both the private and public sectors, and job growth paced the country at 3.6 per cent in 2010," said Mr. Kavcic. "Meantime, while a still-high 13.7 per cent, the unemployment rate has fallen sharply from a recession peak of 17 per cent. For the first time in about a decade (in September), it was not Canada's highest."

The Province of Newfoundland and Labrador is forecasting a $12.3 million surplus for fiscal 2010/2011, one of only two Provinces in the black. That compares favourably to a budget projection of a $194.3 million deficit.

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

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