Royal Bank of Canada. THE CANADIAN PRESS/Nathan Denette
TORONTO – P.E.I.’s economy is expected to grow over next two years, according to the latest economic outlook report from the Royal Bank.
In its provincial outlook released Wednesday, RBC said it expects economic growth in P.E.I. to increase by 1.4 per cent in 2014 and slow in 2015 to a rate of 1.1 per cent.
Craig Wright, the bank’s chief economist, said a pullback in non-residential capital investment is expected to temper the anticipated rise in P.E.I.’s economic activity.
"Providing a partial offset, however, will be a weaker Canadian dollar and strengthening U.S. economy that should provide support to both the province's tourism and export industries in 2014," Wright said.
The anticipated decline in capital investment in PEI in 2014, excluding housing, will reverse a similar sized jump in 2013, RBC says.
The retracement of last year's increases will be seen in both non-residential construction spending and machinery and equipment investment, with the bulk of the decline expected from a significant pullback in the public sector.
The economic outlook notes employment growth accelerated to a 1.8 per cent pace in 2013, as the private sector continued to expand hiring and a rising number of Island residents entered self-employment.
And though strong employment gains continued earlier this year in the province, RBC expects the overall pace to moderate as government fiscal restraint weighs on public sector hiring.
Still, the overall employment gains should be sufficient enough to put further downward pressure on the unemployment rate, RBC says.
RBC anticipates that PEI's spring budget will provide an indication of the province's progress on its path to budget balance by 2015-2016, after a larger-than-expected deficit of $79 million in 2012-2013.
A potential challenge for the province is expected to come from a declining tax base as a greater share of the population enters retirement age.
A further moderation in international migration also presents a potential challenge for the province.