HALIFAX, NOVA SCOTIA--(Marketwired - Oct. 16, 2014) - Economic growth in Nova Scotia may have disappointed recently, but momentum should improve in the next two years, according to the Provincial Monitor report released today by BMO Economics. Real GDP in the province is expected to expand 1.6 per cent this year, up from a 0.8 per cent pace in 2013, before ramping up to a 2.1 per cent pace in 2015. Stronger U.S. demand and the massive shipbuilding contract will support growth in the near term.
"Irving Shipbuilding's $25 billion contract to build combat ships for the Royal Canadian Navy through 2030 will provide supports with preparatory work underway and production expected to begin in 2015," said Robert Kavcic, Senior Economist, BMO Capital Markets. "Exports also stand to improve further in the year ahead, with production from the Deep Panuke natural gas project adding to shipments early in 2014 and auto parts - namely tires - benefiting from strong U.S. auto sales. Additionally, offshore exploration activity is picking up, with BP/Shell set to spend roughly $2 billion in the coming years."
Meanwhile, the province is still experiencing a demographic drain. "Nova Scotia's population has faded since peaking in mid-2011, as net outward migration has totalled more than 2,000 people in the four quarters through the second quarter of 2014," noted Mr. Kavcic. "The pace of out-migration has eased recently, and improved local labour market conditions should help in the year ahead. Employment is down 2 per cent year over year as of the third quarter of 2014 - a 7-year low. The unemployment rate has held relatively steady at just under 9 per cent, but that largely reflects a steep decline in the participation rate of nearly 2 percentage points in the past two years."
With challenging demographics, the housing market, particularly in Halifax, remains soft. "In the latest 12 months, existing home sales in the city hit the lowest level in 16 years, leaving more than a year's worth of supply on the market across the province," stated Mr. Kavcic.
"Our customers have told us that they remain optimistic about the state of Nova Scotia's economy, especially on the heels of stronger U.S. demand and the Irving Shipbuilding contract that will continue to support growth over the course of the next couple of years," said Carolyn Booth, Senior Vice President, Atlantic Provinces Division, BMO Bank of Montreal. "The export market is also expected to benefit heading into 2015, with many of our commercial clients reporting a renewed optimism thanks to a number of projects, including offshore exploration and natural gas projects."
The full Provincial Monitor can be downloaded at www.bmocm.com/economics .
About BMO Financial Group
Established in 1817 as Bank of Montreal, BMO Financial Group is a highly diversified financial services organization based in North America. The bank offers a broad range of retail banking, wealth management and investment banking products and services to more than 12 million customers. BMO Financial Group had more than $586 billion in total assets and approximately 47,000 employees at July 31, 2014.
