Nova Scotia has gotten a thumb’s up from at least one of the three rating agencies that analyse and report on the province’s financial performance. Despite a global economic downturn, Nova Scotia continues to show resilience, says DBRS Ltd., which recently hiked the province’s long-term rating trend from “stable” to “positive.”

According to the Toronto-based agency, Nova Scotia’s upward mobility is the result of “the notable progress the province has made toward lowering its debt/GDP ratio,” hand in hand with “its prudent and forward-looking approach to fiscal management.”

In particular, DBRS notes that Nova Scotia’s debt/GDP ratio will continue to fall — to 34% in 2008-09 from 50% a decade ago. The agency also notes improvements in debt structure, with foreign-currency debt exposure now almost eliminated, compared with a 50% exposure only a decade ago. In fact, Nova Scotia’s long-term rating is actually better than Alberta’s, which is “stable,” according to DBRS.

The province’s first budget update of 2008-09 forecasts a $166-million increase in the surplus by yearend, for a total surplus of $355 million this fiscal year. Energy is driving the good news. According to the latest provincial forecast from Royal Bank of Canada, Nova Scotia’s economy is enjoying the benefits of high energy prices and will see growth remain steady at around 2% for 2008 and 2009.

The good news is flowing into other sectors of the local economy, the RBC report says: “Manufacturing shipments have posted double-digit gains, energy exports continue to offset drops in other export commodities and the higher incomes resulting from the positive terms of trade are boosting consumer spending.”

RBC Economics Provincial Outlook notes that, while natural gas prices have moderated going into the second half of 2008, they are expected to remain at historically high levels through 2009. This will keep work related to the Deep Panuke offshore gas project on track and support increased investment spending.

There are a lot of hopeful eggs nestled in the Deep Panuke basket. Offshore energy exploration from Calgary’s EnCana Corp. project is expected to provide a major economic boost for Nova Scotia. The estimated $700-million project, located about 250 kilometres southeast of Nova Scotia, is expected to begin production in 2010. It will guarantee 1.35 million hours of work, with at least 850,000 hours of that work to be done by Nova Scotians. That may be the tip of the offshore iceberg.

“Nova Scotia has more than 400,000 square kilometres of underexplored offshore potential,” Nova Scotia’s energy minister, Richard Hurlburt, says. “This project not only represents new activity in our offshore, more people working and more investments — it will also mean more interest in our resources.”

It’s not all economic sunshine, of course. And much of the potential cold water being thrown on the good news is coming from provincial Finance Minister Michael Baker. In a recent budget update, Baker cautioned that although things are looking positive for the year so far, the global credit crisis may alter the outlook.

Nova Scotia is not the only province on the East Coast to get a pat on the back from a credit agency recently. Newfoundland and Labrador has also received an upgrade from DBRS, and Prince Edward Island also got the nod of approval from Standard & Poor’s Corp., which affirmed its ratings.

Now, it’s time to wait and see how Nova Scotia will fare, given the darkening economic outlook beyond its borders. IE