Outlook for 1997

The Provincial economy will continue to see significant adjustments occur in 1997. Lower activity in the consumer and government sectors will reduce overall output by about 2.7 percent. However, investment is expected to remain strong and exports are forecast to record solid gains.

Consumption

Consumers are expected to remain cautious in the wake of declining job opportunities and income erosion -- retail sales are expected to decline by 2.3 percent this year. On a positive note, the harmonization of the RST and the GST will result in an overall reduction in prices. This will keep inflation, at 0.6 percent, well below the national average.

Employment is forecast to decline by 1.9 percent as annual employment related to Hibernia falls by about 3,200 and both levels of government continue to practice fiscal restraint. The loss of these relatively high paying jobs will result in labour income falling by 3.3 percent. Employment insurance payments are expected to increase somewhat this year, however, TAGS payments are expected to decline by about $60 million. Overall, personal income is projected to fall by 2.3 percent.

Investment

Gains are projected in investment this year. Increases in oil related investments are expected as the Hibernia project moves into production mode, construction of the transshipment facility commences, and work begins on the Terra Nova oil project. As well, expenditures related to the development of the Voisey's Bay mining project should start this year. Residential investment is expected to fall somewhat as housing starts decline to about 1,900 units.

Government

Commitments by the federal and provincial governments to achieve long-term fiscal stability will translate into reduced expenditures and this will lower the size of the public sector.

Exports

Gains in the export sector will be broad-based this year but will continue to be led by the fishing and mining industries. The mining industry is expected to increase output again this year, with shipments of both iron ore and gold recording substantial gains. Furthermore, the fishing industry will benefit from higher landings of shrimp, capelin, herring and seals as well as continued diversification efforts. The forestry and tourism industries will also contribute to export growth. Exports of newsprint are forecast to increase somewhat, benefitting from a strengthening of global demand. The tourism industry is expected to benefit substantially from the Cabot 500 celebrations this year, with a significant increase in the number of tourists anticipated.

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