Smoother economic sailing is forecast for Nova Scotia, as real gross domestic product (GDP) is expected to rise to 2% in both 2015 and 2016 from 1.5% last year.
“In the 2015 [provincial] growth rankings, Nova Scotia is expected to place sixth, ahead of the other Atlantic provinces and Quebec,” says Gerard Walsh, economist with RBC Dominion Securities Inc. Toronto.
The brighter outlook relates to the shipbuilding and offshore gas industries in particular. The much anticipated rollout of the $25-billion federal contract awarded to Halifax-based Irving Shipbuilding Inc. to construct a new fleet of combat ships for the Royal Canadian Navy will begin in earnest in 2015.
“With the $300-million construction phase at the Halifax shipyard winding up, steel will be cut this [autumn] on new surface combatant ships, beginning 25 years of steady activity,” notes Fred Morley, executive vice president and chief economist with the Greater Halifax Partnership.
Next year will mark the first full year of production, and the first vessel is slated to roll off the line in 2018. Over the life of the contract, employment will peak at 2,000 to 2,500 workers.
Offshore gas exploration and production also are ramping up. BP Exploration (Canada) Ltd. now holds exploration licences for four blocks across 14,000 square kilometres (km), located 300 km off the coast of Halifax.
As part of Shell Canada Ltd.’s $970-million deepwater exploration initiative, that company completed seismic imaging off the coast of Nova Scotia last year.
“New offshore projects can have a large impact on growth in a relatively small province such as Nova Scotia, and there is $2- billion worth of exploration work going on offshore,” says Walsh.
Production activity is underway at Deep Panuke. That natural gas field, approximately 250 km southeast of Halifax, generated $395 million for Encana Corp. in the first quarter of 2014. As well, the Sable Offshore Energy Project, which involves the development of five natural gas fields near Sable Island, roughly 225 km off the coast, produces more than 200 million cubic feet of natural gas a day, although plans to decommission those fields are underway.
Other positives include a handful of major projects. Significant construction will begin this year on the $500-million Halifax Convention Centre and the $1.5-billion Maritime Link, the latter of which will connect Nova Scotia and Newfoundland and Labrador’s electricity grids.
Still, Nova Scotia is continuing to grapple with its deficit. In 2014, it was $679 million, or 1.7% of GDP. Two one-time factors, related to accounting adjustments and receipts, were mostly to blame for the large shortfall. In 2015, the deficit is expected to be about $221 million. “That’s less than a third of 2014, which is a very positive number,” says Mary Webb, director of economic and fiscal policy with Bank of Nova Scotia in Toronto.
In addition to the province decreasing its deficit, the government is facing another major economic hurdle in the coming years: an increasingly aging population. According to Statistics Canada, 166,519 Nova Scotians – roughly 17.7% of the province’s population – were 65 years of age or older in 2013. “This weighs on demand for new housing … and future GDP growth generally since the province is not adding net new potential workers,” says Walsh.
In the short term, though, Nova Scotia can enjoy the economic benefits that come from declining oil prices. “It will be like a tax cut for families that are stretched,” says Webb. “It is very welcome relief.”
GDP, 2013 ($bil.): 39.1
GDP % change: +2.4
2014-15 deficit ($mil.):220.9
Estimated net debt ($bil.): 14.8
Per capita wage growth, % change, 2013-14: +2.8
Household disposable income, per capita: $27,593
Figures from latest available reports/estimates
Sources: Conference board of Canada; province
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