An increasingly robust U.S. economy is giving New Brunswick a much needed boost. In particular, a growing U.S. housing market is welcome news for the province’s forestry industry, which had more good news when the government increased the amount of softwood the industry can take from Crown land by 20% in 2014.
“The forestry [industry] will see increases in capacity from new investment and an enlarged allowable cut, which should allow [the industry] to meet demand emanating from rising U.S. housing starts,” says Gerard Walsh, economist with Toronto-based RBC Dominion Securities Inc.
The decreasing value of the Canadian dollar (C$) also bodes well for New Brunswick, as it “makes our Canadian industry [look] much more positive,” says Mary Webb, director of economic and fiscal policy with Bank of Nova Scotia in Toronto.
In fact, growing U.S. demand, spurred by the lower C$, has Walsh predicting that New Brunswick’s real gross domestic product (GDP) growth will move into the black for the first time in at least two years. GDP growth of 1% is predicted for 2014, accelerating to 1.8% in 2015.
“We expect much of New Brunswick’s growth potential to come from exports,” Walsh says.
“The province sends more than 90% of its exports to the U.S., and ensuring there’s capacity to meet growing demand is key.”
Capacity clearly is growing in the mining sector, a key export for the province. Canadian Potash Corp. is poised to begin operations at its new $2.2-billion Piccadilly mine in Penobsquis, N.B. At least seven years in the making, that mine is expected to open the door to the Latin American market.
PotashCorp’s plans to close a nearby mine also have been delayed, offering temporary relief for the industry. As a result of these and other developments, a report from the Conference Board of Canada is forecasting a 7.3% increase in real mining output in 2014 and a further 24% increase in 2015 for New Brunswick.
But this good news is offset by a provincial debt load estimated to hit $12.2 billion – or 37.7% of nominal GDP – later this year, with a projected deficit of $391 million. The previous Progressive Conservative government attempted to address this issue with a series of deep cuts and other austerity measures, such as asking public-sector employees to take voluntary unpaid leave.
But the new Liberal government is taking a different approach. As part of the Strategic Infrastructure Initiative, the province will invest almost $600 million over the next four years, creating up to 1,750 jobs a year and contributing $120 million annually to the provincial economy.
With this initiative, the government also is asking the public for ideas with the following question: “With all of the financial challenges facing our province, what three things do you think governments could do to raise money?”
“We are facing a big challenge as a province, and the government cannot fix this alone,” says Victor Boudreau, the minister responsible for the strategic program review, which is designed to reduce the provincial deficit. “We are going to be looking to New Brunswickers for their ideas, creativity and hard work in the weeks and months ahead as we work to right our fiscal ship.”
Webb lauds this consultative initiative, but, she adds, earlier cuts have paved the way for a healthier economy.
GDP, 2013 ($bil.): 31.9
GDP % change: +0.4
2014-15 deficit ($mil.): 391
Estimated net debt ($bil.):11.6
Per capita wage growth, % change, 2013-14: +1.4
Household disposable income, per capita: $27,432
Figures from latest available reports/estimates
Sources: Conference board of Canada; Province IE chart
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