NS and Economy

NS: Report reveals economic challenges for Nova Scotia
By Staff, Transcontinental Media

Source: The Daily Business Buzz, November 17, 2010

[HALIFAX, NS] — Today, Scotia Economics released a Provincial Trends Report indicating that Nova Scotia is expected to post real GDP growth of 1.9% in 2011, matching this year’s estimated output advance but lagging behind most other provinces.

After avoiding the worst of the recession, Nova Scotia has seen an uneven recovery in manufacturing and a further, albeit more moderate, decline in its energy sector. Private-sector services will be relied on to drive the economy.

The report also states that Canada’s growth performance has shifted to a lower gear, mirroring trends in the broader global economy. Growth will be relatively more robust in the West, with high commodity prices stoking resource investment and production, and supporting relatively firmer employment, income and spending trends. The Atlantic region is expected to see fairly steady, moderate growth in the year ahead.

“The slower national momentum over the spring and summer is expected to persist into 2011, reflecting a number of factors, including a winding down of inventory restocking, a cooling off in housing activity and a more cautious consumer,” said Alex Koustas, an economist with Scotia Economics. “Meanwhile, resource-related activity is ramping up alongside strong emerging market demand for key industrial products, which along with a weaker U.S. dollar, is boosting commodity prices.”

Trends to watch for in Nova Scotia:

• Private-service sector employment is driving job growth, as manufacturing continues to languish and construction slows. Nova Scotia’s finance, insurance and real estate sector as well as its professional services sector have expanded at an average yearly rate of 2.7% since 2000 — one of the fastest and most significant factors of growth for the province. Of particular note are the information technology and financial components, both of which have a larger stake in the economy than in most other provinces, while exhibiting growth at or above the national average.

• Nova Scotia has achieved modest population gains from 2000 to 2009, with international immigration being the main driver. Halifax has been the chosen destination for immigrants, with its population growing at an average annual rate of 1.5% over the decade — accounting for over three-quarters of total population growth — well ahead of the provincial average of 0.5%.

• To tackle its structural deficit and avoid a significant run-up in debt, Nova Scotia implemented a two percentage point rise in its Harmonized Sales Tax (HST) as of July 2010, filling the tax room vacated by Ottawa. While this measure will hasten the province’s deficit elimination, it will weigh on consumer expenditures.