Continued sluggishness in the U.S. and European economies is putting a damper on global demand for Prince Edward Island’s signature exports of potatoes and seafood, prompting analysts to give a softer economic outlook for the province this year. However, one sector has been gaining ground, generating unexpected revenue for the province.

“The aerospace sector was a great upside surprise in 2011,” says Peter Hall, chief economist with Export Development Canada in Ottawa. “As the year was closing out, companies’ order books were strong with particular demand from the U.S., so that’s a wonderful trajectory; they will be very well positioned for the next year.”

The aerospace industry is P.E.I.’s fourth-largest sector and it generated about $360 million in revenue last year, which is about 25% of P.E.I.’s international exports, notes Fred Bergman, a senior policy analyst in Halifax with the Atlantic Provinces Economic Council.

Another positive for P.E.I. has been diversification of one of its chief exports — agrifood — into emerging markets such as China, India, and Brazil. Says Hall: “Pricing for crops and livestock will be strong, over the medium- to long-term.”

Although this is a recent development, Hall sees rewards for the future. EDC’s forecast is 5% growth for P.E.I.’s agrifood sector this year, an industry that usually accounts for more than two-thirds of the island province’s exports.

For now, APEC predicts that the province’s real gross domestic product will only increase by 1.2% in 2012 because of the lagging demand in the U.S. and European markets for P.E.I.’s agrifood and seafood. Bergman notes growing conditions were not as favourable this past autumn for potato crops as in the past, and volume dropped by 6%. However, pricing has remained fairly consistent. 

Lobster sales have dropped 17% year-to-date. Catches were also down by 13% in 2011. However, Bergman notes that 2010 marked a record catch. As long as sea conditions for catches are favourable this year, he sees the sector reviving and prices growing stronger as the U.S. economy recovers and demand for seafood increases.

P.E.I.’s deficit stands at about $74.4 million. Although the province is scaling back $5 million from program expenditures, the savings are only making a dent, Bergman says: “They’re going to have to take bigger steps in their next budget. I haven’t seen them take on any significant tax measures yet.” IE