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Economic growth in Prince Edward Island hit a speed bump this year, according to the latest RBC Economics Provincial Outlook released this week.
While the provincial economy is expected to shift into high gear in 2014, the anticipated drivers of economic growth will change, as external trade strengthens and the domestic economy slows, says the outlook.
RBC forecasts real GDP growth easing to 1.2 per cent in 2013, with external trade supporting modest acceleration to 1.7 per cent in 2014.
“Indicators of economic activity in P.E.I. suggest the domestic economy hit a soft patch earlier this year, due to easing in labour market activity and cooling housing starts, and is expected to come under increased pressure as demographic challenges persist and fiscal restraints intensify,” says Craig Wright, senior vice-president and chief economist, RBC.
“That said, we expect this dip in activity to occur amid offsetting pick-up in the export sectors after a sluggish start to 2013.”
RBC indicates that robust employment gains in P.E.I. earlier in the year, have given way to weaker labour market activity, as public sector losses escalated this summer. Despite recent moderation, employment remains up 2.6 per cent on a year-over-year basis in August and is expected to be sustained by an uptick in private sector hiring before easing in 2014.
Demographic challenges in P.E.I. intensify, as population growth dipped to negative territory earlier this year. RBC says that net international migration dropped below zero in the first quarter for the first time in over a decade, while Islanders increasingly relocated to other provinces after 2012 recorded the largest net outflow of migrants to other provinces in 43 years.
After a brief pause earlier this year, exports are expected to take flight in 2014 and offset P.E.I.’s weaker domestic economy. Potatoes, the Island’s agricultural staple, are expected to support year-over-year export gains as a firmer market for the vegetable arises in the U.S. Export growth opportunities such as a PEI operation winning a federal government contract in the aerospace industry and investments directed to expanding key provincial industries, for example fishing and wind power suggest activity in these sectors will continue to carry P.E.I. to modest growth this year and next, RBC says.
Atlantic Canada’s economic growth is showing greater strength in comparison to 2012, primarily due to the exceptional economic performance of Newfoundland and Labrador, says the RBC outlook.