A local economist predicts China's economic slowdown will have a domino effect on the province, as people will be forced to lower their standard of living.
"We've become entitled in a sense to a certain level of expenditure, a certain level of services, a certain quality of a standard of living," Wade Locke said in an interview with CBC News Monday.
"That may have to change."
Back in May, Locke rebuffed pollster Don Mills' claims that people in the province were delusional about the economy.
However, Locke said that was before Monday's game-changing announcement that China's main index, the Shanghai Composite index, sank 8.5 per cent — its biggest one-day drop since 2007.
Newfoundland and Labrador relies on China as a buyer of iron ore, nickel, oil and fish. The country has been the largest single source of demand for oil in recent years.
Locke said fracking and other factors have contributed to the oversupply of oil; there's also been a reduction in terms of demand. Both factors together, he said, have resulted in the falling price of oil.
Locke said it's hard to make predictions about the future, and how long the current economic climate could last.
"When this first happened when the budget came out last year, [there were] a lot of indications that it was a two to two-and-a-half year problem," he said.
"It looks longer now. It's hard to know."
The economist said he's especially concerned about the falling price of iron ore which has dropped as dramatically, if not more dramatically, than the price of oil.
That, in combination with a reduced demand from China, leads Locke to believe outstanding projects, like IOC in Labrador West, might be put on hold, while future projects may be shelved altogether.
"Oil and minerals have fuelled the economic activity in this province for a long period of time, and allowed us to have an elevated standard of living," said Locke.
"If those revenues are not available, and that activity is not available, it means there will be less employment, it means that we'll be able to fund less services, it means there will be an adjustment, certainly in terms of our standard of living and our well-being."
With files from Peter Cowan