November 28, 1996
The following statement was issued today by Paul Dicks, Minister of Finance. It was also read in the House of Assembly:
Release of Quarterly Economic Review - November 1996
On November 18, I informed honourable members that the Newfoundland economy is faring better in 1996 than expected. Today I will be tabling the November 1996 "Economic Review" which explains the improved economic situation so far this year in more detail. This short report provides key highlights of all major sectors of the economy, and includes government's revised forecast for 1996.
The Gross Domestic Product (a measure of all the incomes earned in the province) is now expected to decline by 2.9 per cent compared with the 4.3 per cent decline projected last May. This 1.4 percentage point improvement is partly because of strong capelin and shellfish fisheries, but mainly because work at the Hibernia construction site continued for longer than expected until October. This generated an extra 1,000 person years of employment beyond the 3,200 initially estimated. It also boosted total employment which is now expected to fall by 4.2 per cent, an improvement of 0.8 percentage points from the 5.0 per cent decline forecast earlier. The improvement in GDP was greater than the improvement in employment due primarily to the high incomes earned by Hibernia workers.
Government anticipated the provincial economy would go through a period of transition and adjustment following the conclusion of Hibernia construction activities. This is the norm when an economy has been stimulated by a mega-project. Accordingly, we expect the adjustments to continue into 1997.
As I stated when I delivered the mid-year fiscal update, while the economic situation is somewhat better than expected this year, it is still imperative that we maintain a sound fiscal position to ensure we can continue to provide essential and sustainable public services. I am, however, encouraged by the current upward change in the economic forecast.
With this caution in mind, I would point out that upward revisions to economic indicators other than GDP also reflect a better-than-anticipated economic performance this year. Personal income, previously forecast to fall 3.5 per cent, is now expected to drop 1.8 per cent. As a result, consumer spending is better than expected and retail trade, previously forecast to drop by 3.5 per cent, is now expected to fall 1.5 per cent.
The single biggest improvement was in the housing market. Housing starts were previously forecast to fall by 8 per cent; we now expect that they will rise by nearly 4 per cent. Indeed, in the first nine months of this year starts were up by 7.1 per cent with improvements in both rural and urban areas. The Goose Bay area recorded particularly strong growth with starts up more than five times from only 14 in the first nine months of last year to 78 this year.
The real estate market has generally been strong this year as home sales in the first nine months were up nearly 20 per cent. Lower interest rates, the lowest in 30 years, and the fact that net out-migration has been less this year than originally expected, are also key factors in this much improved situation.
I also note that exports and other sectors of the economy are performing well. Specifically, we are seeing improved performances in the province's manufacturing and fishing sectors, and we predict a positive year for our mining industry. As well, we are seeing renewed investor confidence in our oil and gas industry. This is facilitating increased exploration and new project development as demonstrated by the recently announced Terra Nova development project.
In summary, this government anticipated the provincial economy would go through a normal period of transition and adjustment following the conclusion of work at the Hibernia construction site. The upward change in the economic forecast I have outlined is significant and encouraging. I would encourage Honourable Members to peruse the Economic Review as it outlines impacts on each of the major sectors in our economy.