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November 30, 2010

Minister Provides 2010-11 Fall Financial Update

The Honourable Tom Marshall, Minister of Finance and President of Treasury Board, announced today that, given higher-than-expected oil production and tax revenues, the Provincial Government is now projecting a surplus for the 2010-11 fiscal year of approximately $12.3 million, an improvement from the $194.3 million deficit forecast in Budget 2010. The province�s net debt is now estimated to be $210 million lower than projected. These are some of the highlights outlined by Minister Marshall today in delivering the fall update of the province�s finances.

"The updated financial projections for the province indicate an improvement of $206.6 million, which would bring us back into a surplus at the end of this fiscal year," said Minister Marshall. "The province is in a solid financial position, particularly considering the challenging fiscal situations in which many jurisdictions around the world find themselves in the wake of the global recession. Our government set a course and made its way through the downturn, and the province has maintained a positive economic and fiscal outlook as a result. However, we must be ever vigilant in managing our financial resources and our spending in a prudent and sustainable manner."

Provincial revenues overall are now anticipated to be $303.2 million more than originally projected. Oil-related royalties are expected to be approximately $65 million higher than the Budget forecast in late March. This is a result of an additional 12.1 million barrels of oil now expected to be produced compared to the estimate in March. Revenue gains from increased production, however, are offset somewhat by lower oil prices, a higher-than-expected Canadian dollar and increased development and production costs.

Revenues from corporate income tax and personal income tax are also projected to be higher than first forecast. Corporate income tax is now expected to account for almost $165 million more in revenues than forecast in March, with approximately $120 million of this associated with the offshore industry. Personal income tax revenues are estimated to be more than $31 million higher.

Total expenses have increased by $96.6 million due primarily to unforeseen expenditures related to Hurricane Igor, as well as adjustments to pension expenses resulting from changing actuarial assumptions.

"Oil prices and production levels, the exchange rate for the dollar, as well as other factors affecting the province�s finances, are volatile, and can and do change," said Minister Marshall. "We must stay mindful of that reality, particularly given the ongoing economic uncertainty in the U.S. and around the world."

Following the effects of the recession in 2009, the province�s economy has not only resumed growth this year, but real GDP is expected to expand by 5.4 per cent to lead all provinces. Labour markets have also rebounded, with employment on the rise and the unemployment rate resuming its downward trend.

"Newfoundland and Labrador�s economic growth is expected to lead the country this year, driven by strong capital investment and increased mineral and oil production," said Minister Marshall. "Our government is continuing to strengthen the province�s fiscal capacity by diversifying and growing the economy. As a result of our strategic investments and sound financial management, Newfoundland and Labrador has a firm foundation in place."

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

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Media contact:

Mark King
Director of Communications
Department of Finance
709-729-6830, 699-3454

2010 11 30                                                     1:30 p.m.

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