Debt, taxes and unemployment

Although the pillars of the Newfoundland and Labrador economy are suffering, a few bright spots, such as tourism and mining, are showing surprising resilience

By: Gavin Will
March 30, 2017 October 31, 2019
23:20

If night is always darkest before the dawn, then the beleaguered residents of Newfoundland and Labrador might have reason to celebrate soon.

That’s because the economic maelstrom besetting the province has placed it on life support only a few short years after being dubbed Canada’s version of the “Celtic tiger.” This year, the province’s gross domestic product is forecast to shrink by 3.6% – a far cry from 2013, when it grew by 5.2%.

Taxes in various forms – including on personal income, HST, gasoline, insurance, books and a new levy on earnings – has dampened retail sales. Then, there are the recent public-sector layoffs and the threat of further job losses.

To make matters worse, escalating cost overruns on the Muskrat Falls hydroelectricity project have given the government few options for relieving the pressure on taxpayers. The project, budgeted at $7.4 billion in 2012, is now expected to top $11.7 billion and is two years behind schedule. When Muskrat Falls finally comes onstream, ratepayers’ power bills will most likely double.

To round out the litany of doom and gloom, crab and shrimp stocks are collapsing, thereby putting the province’s most important fisheries at risk. Perversely, blame for the declines is being placed on the recovery of cod: thanks to successful conservation efforts, cod is back – although population levels still are considered too low to risk a commercial fishery.

Still, there are some bright spots. Thanks in part to the exchange rate on the U.S. dollar, and in no small measure to the success of the Broadway production Come From Away, bookings in all parts of the province are exceeding expectations. Years of highly professional and targeted advertising campaigns by the governments in Canada and the U.S. has resulted in steady growth in tourism in the province over the past few years; now, tourism operators are faced with the happy problem of meeting demand for hotels, souvenirs, restaurants and travel experiences.

The province’s mining industry also is in recovery. In the town of St. Lawrence on Newfoundland’s southeast coast, Canada Fluorspar (NL) Inc. – wholly owned by San Francisco-based Golden Gate Capital – is set to begin production this summer after a three-year delay. This is especially welcome, given the town’s loss of a major fish-processing plant in 2011.

Recovering iron ore prices have resulted in Alderon Iron Ore Corp. opting to commence construction of its Kami project near the site of the defunct Wabush mine. And Iron Ore Co. of Canada (IOC) will spend $79 million on the Wabush 3 mine, also located in western Labrador. This expansion will add 12 years to IOC`s operations, and is expected to begin production in 2018.

And, along with mining, oil exploration is expected to gain traction this year as major offshore-licence holders begin drilling for new oilfields.