Prince Edward Island may be best known for potatoes and seafood, but these will not be the businesses that drive its economic growth in the future. Instead, Canada’s smallest province is looking to dynamic industries such as wind energy, aerospace and biosciences to lead it out of the economic downturn that is paralyzing the country.

A recently announced $1-billion wind-power development project will boost the province’s wind-power generating capacity to 500 megawatts by 2013 from 150 MW today. The project will include $40 million of local construction annually for five years, says Sabrina Browarski, an economist with the Conference Board of Canada in Ottawa, which is equivalent to an annual increase of one percentage point in P.E.I.’s gross domestic product.

However, this growing energy sector is not immune from the economic slowdown. In December, the P.E.I. government postponed its request for proposals on the new project by four months because of the challenging global economy. But even though the project may not get off the ground until 2010, economists are bullish on wind power’s long-term prospects.

P.E.I. has also thrown support behind biosciences and aerospace, one of the province’s fastest-growing industries with 850 workers. An innovation program launched this past December offers financial support for research in both sectors, as well as in renewable energy and information technology.

As a result of these projects, while 2009 will be a difficult year for P.E.I., Browarski says, it will be an improvement from 2008.

The Conference Board’s most recent forecast calls for real GDP growth of 1.3% for P.E.I. in 2009, up from its estimate of 0.7% growth in 2008.

However, many economists are less optimistic about what’s to come. The Atlantic Provinces Economic Council expects P.E.I.’s real GDP growth to slow to 0.8% in 2009 from 1.1% in 2008. Economists at the major banks are taking an even dimmer view, with forecasts as low as a 0.7% decline in real GDP.

“Looking ahead, things are much more bleak,” says Robert Hogue, senior economist with Royal Bank of Canada in Toronto, “at least over the first half of 2009.”

Although sectors such as aerospace show promising long-term prospects, warns David Chaundy, senior economist with APEC in Halifax, they won’t be sheltered from the economic storm. Aerospace is likely to suffer, he says, as demand for air travel declines and struggling airlines cut back.

Nor are financial services and IT — sectors that have experienced healthy expansion in recent years — likely to experience the same level of growth in the current economic climate, economists say.

As for P.E.I.’s dominant fishery and farming industries, they face challenges of their own. These export-dependent sectors are suffering from weak global demand that’s driving down prices. Sales of discretionary items such as lobster and bluefin tuna have already dropped amid slumping demand.

“We’re expecting that in the coming year, we’re going to see a dampening price effect on the industry,” Browarski says, adding that the fishing and trapping sector is expected to contract by almost 10% nationally in 2009. “Fishery is one sector we’re expecting will be a net drag on the economy in P.E.I. in 2009.”

Low prices are not new for P.E.I.’s farmers. After several years of low prices and high production costs, the environment has recently become more favourable. Reduced acreage among potato farmers boosted potato prices in October 2008 to almost double their 2007 level, at the same time as lower energy costs made for cheaper operating costs.

“The question is,” Chaundy says, “in the current economic climate, whether those prices are weakening again.”

In the long run, Chaundy does not expect to see growth in P.E.I.’s farming sector: “It’s important, but it’s not one of the more dynamic sectors of the economy.”

Domestic consumer spending is also set to fall this year, particularly with an expected increase in unemployment. Already at 11.8%, P.E.I. has the second-highest unemployment rate in Canada, behind Newfoundland and Labrador, according to Statistics Canada.

However, a five-year capital-spending plan that provincial treasurer Wesley Sheridan unveiled this past November will probably soften the blow to P.E.I.’s economy, Chaundy says. The $510-million stimulus package includes plans to create 5,043 jobs, as well as widespread infrastructure spending and spending in health care, transportation and other areas. IE