PEI

P.E.I. economy in 'better spot' than anticipated, says finance minister

A fiscal update for P.E.I. delivered Wednesday shows the Island coping relatively well with the economic consequences of the pandemic, says Finance Minister Darlene Compton.

‘There’s some good news stories’

Finance Minister Darlene Compton sees a settling of the labour economy this fall. (Randy McAndrew/CBC)

A fiscal update for P.E.I. delivered Wednesday shows the Island coping relatively well with the economic consequences of the pandemic, says Finance Minister Darlene Compton.

Compton spoke to Island Morning host Mitch Cormier about the update Thursday.

"We are actually in a better spot than we thought we would be," Compton said.

"There's some good news stories through this. Construction is up 7.3 per cent year to date. Housing starts are up 13 per cent through the second quarter of 2020. Farm cash receipts are at a record high."

The government is forecasting the economy will shrink 3.9 per cent in 2020, an improvement over the spring projection of 5.1 per cent. But the government's projected deficit is climbing, up $5.4 million to $178.1 million.

The sector suffering the most is tourism.

"Accommodation, food and beverage services, are definitely down and that's the biggest pocket that is struggling through this pandemic," said Compton.

The summer season is looking like it could be down as much as 60 per cent. Growth in other sectors, however, is balancing that out for the economy overall, said Compton.

Chaotic labour economy

The labour economy has been volatile.

Thousands left the labour market in April, and returned in large numbers in June only to leave again in the summer months. The unemployment rate has followed a similar path up and down, rising as high as 15.2 per cent in June and remaining in double digits since April.

Compton said she expects job numbers on the Island to return to something like a pre-pandemic norm this fall, even as the tourism sector continues to struggle.

As for the rising deficit, there are two main factors, she said.

One, the province has seen fewer federal dollars than expected, because some Build Canada projects are delayed. That has decreased projected revenue.

On the expenses side, pandemic costs have been higher than anticipated. That includes the cost of reopening schools.

Reopening schools has been costly. (CBC)

The province has set aside a $65 million contingency fund in the event of a second wave of COVID-19, said Compton.

Another factor working in the province's favour, said Compton, is that bond raters have given P.E.I. stable ratings, which means interest rates on the debt won't change. That will help keep finances under control.

More from CBC P.E.I.

With files from Island Morning

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