The Economy 1998


Provincial Economic Outlook

 

OUTLOOK FOR 1998

c-01342.gif (4377 bytes)This year is expected to mark the beginning of a period of strong economic growth. Forecasters are predicting that the Province will be among the top achievers in economic growth this year. Real GDP is forecast to grow 4.5 percent, led by exports and megaproject development activity.

EXPORTS

Gains in exports are projected to be broadly based. The production of about 25 million barrels of Hibernia crude, more fish exports due to increased shrimp, capelin and crab landings, and rising production by non-resource based manufacturers are expected to be the major growth areas.

INVESTMENTS

Investment is expected to increase by 11.6 percent in 1998, the strongest growth rate of all the provinces. Higher construction spending by the oil industry (Terra Nova), the communication and utility industry and the public sector (new hospital and road construction) will be significant contributors to expected investment gains. As well, plans are in place for delineation drilling of the Whiterose and Hebron oil fields this summer.

EMPLOYMENT AND PERSONAL INCOME

Increased construction activity and exports are expected to generate a two percent increase in employment, reducing the unemployment rate to 17.8 percent. The construction, CBPS, and manufacturing industries are expected to show solid gains in employment. Higher wages and employment are expected to result in labour income growth following a decline in 1997. The resultant gains in personal income, however, could be partly offset by lower transfers to individuals depending in large measure on how the federal government responds to the August expiry of the TAGS program.

CONSUMER SPENDING

Retail sales and housing investment are expected to show some small gains this year, however, growth is expected to be restrained by weak income gains and lower population.

DEMOGRAPHICS

Migration is likely to remain a key source of demographic change in 1998. Key influences on individual migration decisions are expectations of employment opportunities elsewhere and continuing adjustments in coastal economies to the decline in groundfish stocks. Migration from rural areas to larger centres within the Province is expected to continue, as well as migration to mainland Canada where employment growth has been strengthening, particularly in Ontario and Alberta. Combined with a decline in the number of births, total population is expected to fall by 1.6 percent.

BEYOND 1998

The economic outlook beyond 1998 is encouraging. Strong growth is forecast, based largely on the development and operation of offshore oil, mining and hydro-electric projects. Steady output in the pulp and paper industry, expanding shrimp, groundfish and capelin landings and growth in the aquaculture, tourism and IT sectors will all contribute. As the Province enters a stronger growth phase, investment, employment and real personal incomes should increase and the unemployment rate is expected to continue its decline.

 

c-01350.gif (4393 bytes)WHAT OTHER FORECASTERS ARE PREDICTING   THE PROVINCE

As indicated in the diagram, all major forecasters expect substantial real growth in provincial Gross Domestic Product in 1998. While expectations vary, the consensus places Newfoundland among the leaders in provincial growth this year. Underlying the strength suggested by these forecasts is the production of Hibernia crude oil and the development of the Terra Nova oilfield.


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