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December 7, 2009

Minister Releases 2009-10 Fall Financial Update

Today, the Honourable Tom Marshall, Minister of Finance, released the 2009-10 fall financial update.

The Provincial Government is now forecasting a deficit of $443 million, an improvement of $307 million as compared to a $750 million deficit forecast in Budget 2009. Strengthening oil prices is the primary reason for the progress during the year. Program expenses have increased to deal with extraordinary circumstances, including response to the closure of the mill in Grand Falls-Windsor. The projected deficit can be predominately attributed to the Federal Government�s elimination of benefits under the 1985 Atlantic Accord.

"The last year has been uncertain from a global economic perspective and while the volatility of the markets and the exchange rate continues to present challenges for the country, our government is well positioned to manage its way through the downturn and the recovery," said Minister Marshall. "We have taken an aggressive approach to lower taxes, pay down the debt, lower borrowing costs and have made strategic investments in programs and infrastructure in order to stimulate the economy and provide jobs for our people. This plan, led by Premier Williams, is working and has allowed our province to navigate the economic challenges better than most. Consumer confidence is high, housing starts are robust and housing prices are 18 per cent higher than last year."

Newfoundland and Labrador has not been immune to the impacts of the global recession. Industries, such as mining, fishing and forestry, have all been affected. The gross domestic product (GDP) is expected to decline 8.5 per cent this year, due to lower mineral, newsprint and fish production, as well as natural declines in oil production. GDP growth is expected to resume next year as the worldwide recession ends. An anticipated rebound in mineral production and increased construction activity on major projects is expected to result in positive GDP growth in 2010.

The Williams Government previously implemented a multi-year infrastructure strategy which laid the foundation for Newfoundland and Labrador to navigate through the period of economic decline experienced this past year. In Budget 2009, the Provincial Government bolstered this strategy through an additional and unprecedented investment of approximately $800 million in infrastructure projects. This includes investments in roads, hospitals, schools, long-term care facilities, ferries and waterbombers. Approximately 75 per cent of these projects have been tendered and awarded to date. Since forming government in 2003, more than 80 per cent of infrastructure expenditures have been in rural Newfoundland and Labrador.

"After years of neglect, new facilities were needed and others were in need of repair," said Minister Marshall. "Not only have we substantially increased infrastructure spending, we have invested in new programs and improved services to meet the changing needs of our residents. Now, with that strong foundation in place, we must continue with our plan of prudent fiscal management to provide long-term stability."

The fiscal management practices put in place by the Williams Government have provided for significant progress in debt repayment, lower borrowing costs, lower taxes and an improved provincial credit rating. The province has reduced net debt from almost $12 billion to less than $8 billion at the end of 2008-09. On a per capita basis this reduced the amount of debt per person from $22,974 to $15,733.

Net debt at the end of 2009-10 is expected to be $8.6 billion.

"Financial experts and credit rating agencies continue to reaffirm that our plan is working and we are making significant progress," said Minister Marshall. "As a government, we cannot alter from this course, especially as the world recovers from the worst recession since the Depression. While we must recognize our achievements, we must also continue to take a responsible and cautious approach to our investments and planning. We had unprecedented surpluses in the past that helped us become more self-reliant. However, the current global economic uncertainty dictates that we moderate our expectations to ensure our spending of public money is sustainable into the future."

A copy of the fall financial update can be found at:

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Media contact:

Ronalda Walsh
Director of Communications
Department of Finance
709-729-6830, 685-1741

2009 12 07                                                        11:10 a.m.

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