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| The Economy 2004- Newfoundland and Labrador |
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Provincial Economic Overview |
| Review of 2003 |
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Newfoundland and Labrador recorded another solid performance in
2003. Real GDP grew by an estimated 4.7% as growth in exports and
consumer spending continued to fuel the economy. On an adjusted
basis, real GDP grew by an estimated 2.0%. Adjusted GDP excludes
production income from major projects accruing to non-residents.
Last year marked the seventh consecutive year of real GDP growth
(both adjusted and unadjusted). GDP growth in recent years has been largely driven by gains in exports which has been fuelled by oil production. This was the case again in 2003. Oil production grew by 17.9% as both Hibernia and Terra Nova increased production. Output gains were also recorded in the newsprint, fishing and mining industries and, with income and investment gains, the service sector continued to expand. Capital investment increased by 2.2% to $3.8 billion as high levels of spending occurred on both the White Rose and Vosiey’s Bay projects. In addition, housing starts boosted residential investment—capital expenditures on housing increased by 17.5% to $846 million. Housing starts grew by 11.3% to 2,692 units, on the heels of a 35.3% increase in 2002. Housing starts last year were the highest since 1991, reflecting the favourable buying environment (low interest rates) and the impacts of several years of employment and income gains. Employment increased by 1.8% in 2003 to 217,800 person years, continuing the trend of the past several years of employment expanding with overall economic growth. The labour force grew by 1.6%, less than employment growth, resulting in a slight decline (0.2 percentage points) in the unemployment rate to 16.7%. Last year marked the first increase in the population since 1992. As of July 1, 2003 the population of the province stood at 519,570, an increase of 300 persons, the result of positive net migration and natural population growth. Positive net migration was most likely the result of diminished employment expectations elsewhere in Canada as events such as SARS and BSE caused economic weakness in several regions of the country. |
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Outlook for 2004 |
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Real GDP growth is expected to moderate in 2004 from recent
years. On average, private sector forecasters are projecting real
GDP growth of 2.9%. The Department of Finance forecast for GDP,
at 1.3%, is lower, reflecting lower expectations for oil
production and the inclusion of provincial government restraint
measures. Growth in 2004 will stem primarily from consumer spending and construction activity related to Voisey’s Bay and White Rose. Retail sales are expected to continue the trend of recent years, growing by 3.0% and capital investment is forecast to increase by 10.5% to $4.2 billion, the highest level ever. |
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Real exports are expected to be on par with 2003—lower oil production will be offset by higher iron ore shipments and increased service exports. Oil production is expected to be about 3% lower than in 2003 because of reduced production at Terra Nova, while iron ore shipments are forecast to rise by about 10%. Service exports are expected to increase by almost 4% boosted by strong growth in the rest of North America. Other export industries are expected to remain relatively unchanged from 2003. Employment is forecast to grow by 0.9% to 219,700. Employment gains are expected to outpace labour force growth, resulting in a decline in the unemployment rate from 16.7% to 16.4%. Population decline is expected to resume, but at a much slower rate (0.2%) than experienced in the late 1990s. |
Beyond 2004 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Development and production schedules of major projects will continue to have a significant influence on economic growth over the next several years. Real GDP is expected to decline in 2005, premised on the winding down of development work on White Rose and Voisey's Bay, and a further drop in oil production. In 2006, a leap in oil production (from White Rose production and a temporary spike in Terra Nova) and the start of Voisey's Bay production will cause GDP to grow substantially. GDP aside, many indicators are much more stable over the forecast period. This is because changes in mineral and oil production have a greater impact on GDP than on employment and income, a fact illustrated in the adjusted GDP figures. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Detailed assumptions regarding the medium term forecast. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Port au Port Peninsula Photo Credit: Festival Coast Tourism Association |
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| This information was current as of March 16, 2004. | |
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