Provincial Government Releases 2011-12 Mid-Year Update

The Honourable Tom Marshall, Minister of Finance and President of Treasury Board, today announced that the province is forecasting a larger surplus for the 2011-12 fiscal year, primarily due to higher oil production. The projected surplus for 2011-12 has been revised to $755.8 million, up from the $59.1 million that was projected in April. The surplus will be used to reduce the province’s net debt to the lowest level it has been since 1998-99. All figures are dependent on the release of the official 2010-11 Public Accounts.

“This surplus will be applied directly to debt, decreasing the province’s net debt to approximately $7.7 billion, which is a significant achievement,” said Minister Marshall. “There has never been a better time to live in Newfoundland and Labrador. A robust economy is producing record employment, income levels and consumer confidence. Having said that, we must remain prudent in our fiscal management as there are challenges on the horizon that we must face.”

Beginning next year, revenues will be negatively impacted as payments under the Atlantic Accord end. Oil production is also expected to be lower due to natural declines in the fields as well as scheduled maintenance at the Terra Nova and Whiterose projects.

“The loss of offset payments under the Atlantic Accord alone will negatively impact revenues by $536.1 million annually,” said Minister Marshall. “We must be diligent in our fiscal management to ensure that the progress we have made in Newfoundland and Labrador is not eroded.”

Despite the continued economic turmoil affecting a significant portion of the globe, Newfoundland and Labrador’s economy is still experiencing strong performance this year. The Department of Finance has revised the forecast this fiscal year for real GDP growth to 4.9 per cent, up from the three per cent growth that was originally predicted at budget time. Higher than expected oil production is the primary reason for the revision.

“Over the past few years we have used the province’s fiscal strength to pay down our debt while simultaneously investing in programs, services and infrastructure that are vitally important to Newfoundlanders and Labradorians,” said Minister Marshall. “The fact that we have been running surpluses shows that we are living within our means. However, oil royalties account for a third of our revenue base and are dependent on a finite resource. The province has already begun to lower spending growth to more manageable levels. This will continue.”

A copy of the fall financial update can be found at: www.gov.nl.ca/fin/publications/fallupdate2011-12.pdf 

• Video of news conference (43 MB)

- 30 -

Media contact:
Luke Joyce
Director of Communications
Department of Finance
709-729-6830, 725-4165
lukejoyce@gov.nl.ca 

2011 11 16             2:10 p.m.