Unexpected production disruptions and delays across Atlantic Canada slowed economic growth in 2012 but the region is well positioned to see this improve next year, according to the latest RBC Economics Provincial Outlook.
The outlook notes that despite slowing population growth and fiscal restraint, Prince Edward Island’s economy continued to chug along in 2012, supported by dynamic exports and surprisingly resilient domestic demand.
The emerging aerospace industry has been a key source of strength for the province’s economy in 2012, RBC says, fuelling nominal merchandise export growth to the highest rate in the country. Sales of turbo jets and propellers skyrocketed, making aerospace products the province’s second-largest export commodity group, next to potatoes.
RBC also notes that strong gains in U.S.-bound shipments of lobster and french fries contributed to the biggest increase in P.E.I.’s agricultural and fish exports since 2008. Additionally, cruise ship traffic picked up in October, with the scheduled number of ships reaching a record level and leaving expectations for further gains in 2013.
However, a significant pullback in provincial government spending, both this year and next, will dampen domestic economic activity in P.E.I., says RBC. The provincial government has committed to a three-year plan to return the budget to balance and the public sector, which makes up for 40 per cent of P.E.I.’s economy, will act as a notable drag on growth.
“Despite the strong headwinds facing P.E.I., favourable gusts from south of the border will support the province’s export sectors in 2013 and boost real GDP growth to 1.8 per cent, up from 1.4 per cent in 2012,” said Craig Wright, senior vice-president and chief economist, RBC. “Emerging industries of bioscience, aerospace, and renewable energy provide scope for an even better performance in 2014.”