New Brunswick's economy expected to move into recession in 2016
Conference Board of Canada report suggests N.B.'s economy will contract by 0.4% in 2016
New Brunswick's economy is likely to join Alberta's in recession in 2016, according to the latest forecast issued by the Conference Board of Canada — the only two provincial economies likely to shrink this year.
If accurate, it would be the fourth contraction in eight years for New Brunswick's economy — which has struggled to generate any sustained growth since 2008.
"Conditions have been difficult for the province for quite some time," said Marie-Christine Bernard, the conference board's associate director of provincial forecasts.
"We have a recession for New Brunswick for 2016. We should see real economic growth contract."
The Conference Board of Canada is the latest body to downgrade New Brunswick's economic prospects for the year, but is so far the only one that is predicting a recession.
- New Brunswick's unemployment rate jumps to 9.9%
- New Brunswick's GDP jumps 1.9% thanks to manufacturing sector
Over the last 10 days the Royal Bank, Bank of Montreal and Bank of Nova Scotia have all updated their projections and suggested marginal growth for New Brunswick this year of between 0.4 per cent and 0.6 per cent.
However, all projections have been downgraded from original estimates made last year.
The conference board was originally optimistic about New Brunswick's prospects this year predicting growth of 1.6 per cent.
Sussex mine closure a blow
It cut that estimate in half after the announced suspension of potash mining in Sussex and has now slashed it again, partly because of ongoing job creation problems and partly because of tax measures in the Gallant government's February budget.
"We haven't seen job creation for a number of years so the domestic economy is very weak. Government also raised the fiscal burden so it's very difficult for New Brunswick," said Bernard. "It [the HST increase] does weigh on the outlook definitely. Those are negative factors for New Brunswick."
Heading back into recession would be a blow for the province which recently looked like its economy might be getting some traction.
Strong GDP growth won't change prediction
Last month Statistics Canada reported that economic growth was stronger than expected for New Brunswick in 2015 at 1.9%.
It was the fourth-best growth rate in the country and the best in New Brunswick in five years.
The Gallant government had already been pointing to the result as proof it has gotten the province on track.
"I'm very proud to say we had one of the best GDP growths in the country at 1.9% last year," said senior Gallant minister Donald Arseneault during CBC's political panel last week. "It shows that by having a diversified approach it will pay dividends."
Bernard says the 2015 growth rate for New Brunswick surprised the conference board as well, but does not materially affect its belief the province will slide back into recession this year as it did in 2009, 2012 and 2014.
"I don't think it would change our forecast too much," said Bernard
Forestry a bright spot
One of the few bright spots is the forest industry, which is expected to make strong gains over the next two years because of growing demand in the United States, the report said.
The forestry sector is predicted to grow at 6.2 per cent and 10.7 per cent in the next two years.
Statistics Canada reported in May that New Brunswick's economy grew by 1.9 per cent in 2015.
That was the largest boost in the economy since 2010 and it signalled a sharp reversal from the 0.3 per cent decline in 2014.
The job situation in the province has been bleak as the unemployment level has hovered around 10 per cent for months.
On Friday, Statistics Canada released its monthly labour force report that showed the jobless rate was 9.9 per cent.
With files from Dan McHardie