U.S. to drive growth

Exports to the U.S. make up more of New Brunswick’s gross domestic product (GDP) than for any other province, says Laura Cooper, economist with Royal Bank of Canada in Toronto. Most of those exports come from the forestry sector, she says, and with the U.S. housing market bottoming out, lumber exports are expected to increase in the next year or two. Thus, RBC is forecasting 1.7% growth in real GDP for the province in 2013.

The Conference Board of Canada, for its part, is forecasting 1.8% growth.

This growth in the forestry sector also means good news for New Brunswick’s labour force. In December 2012, the unemployment rate in the province reached 10.8%, according to Statistics Canada, and the Conference Board predicts it will decline to 8.1% in 2014.

RBC forecasts only a slight decrease of 0.6% in unemployment in 2013, driven primarily by hiring in the private sector. “It’s still relatively tepid growth,” says Cooper, “but it’s positive.”

Unlike forestry, other sectors of New Brunswick’s economy, such as mining and construction, will continue to struggle in 2013. However, economists are hopeful that this year will prove to be a turning point. The mining sector will struggle a little bit in the first half of 2013, for example, as the Xstrata Zinc mine, located near Bathurst, N.B., will close this year. As well, the recently completed Atlantic Potash Corp. mine near Sussex will shut down briefly in 2013, says Cooper, but is expected to restart production toward the latter half of the year.

@page_break@ Another large mining project currently in the works in New Brunswick is the Sisson project, now being operated solely by Vancouver-based Northcliff Resources Ltd. The Sisson project is a tungsten mine northwest of Fredericton that is in the “engineering advance development” stage, says Bryce Hamming, Northcliff’s chief financial officer.

The company will begin building at the Sisson site sometime between 2013 and 2014 after provincial and federal government approval is received. Actual mining activities, however, are not expected to commence until sometime in 2016.

As well, this coming year will prove to be difficult for New Brunswick’s construction sector. With the completion of many large projects, such as the Sussex mine and the Point Lepreau nuclear generating station, economists forecast a dip in this sector.

Similarly, housing starts are expected to decline to roughly 2,800 units by 2014, says Prince Owusu, senior economist with the Conference Board in Ottawa, down from the 2011 high of 3,500.

The one area expected to pick up in the construction sector is in non-residential construction. In 2012, Cooper says, this type of construction plunged to a seven-year low, so it should improve in 2013.

Finally, unlike in previous years, New Brunswick’s economy will not be getting any kind of boost from the provincial government in 2013.

In years past, government spending would account for roughly 2.1% of provincial GDP growth, says Owusu. But in 2013, total provincial government spending will account for a scant 0.6% of GDP. This steep decline in public funding is the result of fiscal belt-tightening as the provincial government tries to rein in its deficit.

However, public-spending levels could return to more normal levels within a few years. In fact, Gulati expects to see more public spending in the province’s economy in 2015: “Once the deficit kind of comes down, then you’re going to see a situation in which the province can step up and provide support to the economy.”

 

Population: 755,950

GDP 2011 ($bil.): 28.9

GDP % change: 0.0

2012-13 deficit ($mil.): 356.0

Estimated net debt ($bil.): 10.8

Median after-tax income,

all families: $43,600

household disposable income/capita: $26,277

Figures are from latest available reports/estimates

Sources: conference board; Government reports

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