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Nova Scotia Economy Returns to Growth - BMO

HALIFAX, Nova Scotia, June 22, 2010 — After a modest contraction in 2009, Nova Scotia’s economy is expected to return to growth this year, according the Provincial Outlook report from BMO Capital Markets Economics.

“Real GDP will likely expand 2.4 per cent in 2010 and 2.7 per cent in 2011,” said Robert Kavcic, Economist, BMO Capital Markets. “This will end up below the national rate, with the trade sector acting as a drag on the provincial economy.”

Nova Scotia’s manufacturing sector remains sluggish, with sales well below the peak levels seen in 2008 and exports, particularly of natural gas, still depressed. Still, a recovery in demand south of the border, however modest, will help these sectors return to growth, even though the pace will be moderated by a strong Canadian dollar.

The labour market has begun to improve in recent months, with total employment now just shy of 2008’s peak level — a 3.7 per cent jump in private-sector jobs has offset a 5.6 per cent decline in the public sector over the past year. “While this will help consumer spending, the 2 percentage-point increase in the HST on July 1 will act as a drag,” noted Mr. Kavcic.

Non-residential construction has been a key economic driver, but some large-scale projects, like Deep Panuke (natural gas output expected in 2011), will start to fade this year. Government infrastructure spending will pick up some slack before a longer period of restraint.

The government of Nova Scotia is projecting a $222 million budget deficit in fiscal 2010/11, taking a balanced approach to eliminating the deficit in four years that includes spending restraint and tax increases. At about 0.6 per cent of GDP, the deficit is at the low end of the provincial pack, but it will rise to $370 million (1 per cent of GDP) next year. The Province will aim to balance the budget in four years.

News source: BMO Financial Group

 

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