Economic outlook for province better in 2017, BMO says

There's bad news and good news for the Newfoundland and Labrador economy, that's according to the Bank of Montreal.

The BMO says the economy will shrink this year by 2 per cent, but the outlook is brighter for 2017 with growth of 0.7 per cent.

Oil heading back up

Robert Kavcic, senior economist for BMO Capital Markets, says the province's economy will be among the weakest in the country this year, but should rebound somewhat with oil expected to head back to $60 a barrel next year.

"Newfoundland & Labrador's oil sector makes up roughly 22 per cent of provincial gross domestic product," said Kavicic.

The slide in oil prices has hit incomes hard in the province.- BMO Senior Economist, Robert Kavcic

"As a result, the slide in oil prices has hit incomes hard in the province. Production also continues to drift down after peaking in 2007, at least until the pipeline is filled with new output, such as Hebron in late 2017," he added.

BMO also notes that employment has been gradually declining since 2013, with retail sales slowing and average home prices down.

"Many businesses across Newfoundland & Labrador are facing great challenges with the decline in global energy prices," said Lynda Taylor, senior vice president of the Atlantic Provinces Division of BMO.

Fishery should help boost economy

"The oil and gas industry is a big part of the province's economy. The bright side is oil fields are still operating viably because of low operational costs."

Meanwhile, the bank says the province's fishing industry, as in rest of Atlantic Canada, is heading in an encouraging direction. 

"Rising global demand, strong catches and the favourable foreign exchange rate are letting those in the fishing industry drive growth across the province," said Taylor.