Nova Scotia’s economic outlook for 2011 can be summed up in an old adage: “Slow but steady.”

“We’re expecting steady but not spectacular growth over the next year,” says provincial Finance Minister Graham Steele. “And steady is good.”

The provincial government and economists are predicting real gross domestic product growth of roughly 1.5% this year. “That’s about half the national average,” says Paul Ferley, assistant chief economist with Royal Bank of Canada in Toronto.

But, Ferley notes, the lower than average GDP growth reflects a better than average economic performance during the recession: “The province didn’t get as hard hit as much of the country. Therefore, it is not bouncing back from as low a base.”

In fact, says Fred Morley, executive vice president and chief economist with the Greater Halifax Partnership: “Nova Scotia actually enjoyed some growth during the recession. Now, Nova Scotia is just continuing on.”

The province’s strengths include its information technology and professional services sectors, says Alex Koustas, economist with Bank of Nova Scotia in Toronto: “These [sectors] are growing at a healthy rate above the Canadian average and [they make up] a greater percentage of the economy than in any other province.”

That’s partly due to support from the province, which offers research and development tax breaks and has one of the highest digital media tax credits offered in Canada — up to 40%.

Like most other provinces, however, Nova Scotia is set to pull back on some of its support. Says Morley: “It will be the business sector that carries the freight for economic growth in Nova Scotia over the next few years.”

The government has come forward with a four-year plan to balance its budget and is already making inroads, forecasting a surplus of $97.2 million for 2010-11. However, the figure does not include annual expenditures for university funding or student bursaries, which had exceeded $360 million in the previous fiscal year. For the subsequent fiscal year, the province anticipates a “significant deficit” of $370 million.

In addition to less stimulus spending, royalty payments from the Sable offshore energy project, one of the largest known natural gas deposits in North America, are expected to decline. The $3-billion project involves the development of six major offshore fields.

In Sable’s wake comes natural gas from Deep Panuke, which will be processed offshore and transported via a undersea pipeline. Production was set to begin later this year, but development has wound down, notes Ferley, and only modest gains in the price of natural gas are forecast.

Other capital projects are being fleshed out, including $560 million in capital spending planned by the province.

Fingers are also crossed that two major projects will proceed: the Donkin coal mine and the Lower Churchill power venture. The former would explore whether the lifeblood of Cape Breton will flow once more; the latter is a $6.2-billion hydroelectric project involving both Nova Scotia and Newfoundland and Labrador.

In the meantime, the Nova Scotia government is moving ahead to help businesses become more productive. It’s an area that needs work, says Koustas, pointing out that the national average for productivity in Canada is 1.6 units produced per worker. In Nova Scotia, that figure is 1.3.

The province has launched a productivity investment program to help companies improve their employees’ skills and to purchase advanced equipment in an effort to become more competitive.

The new program, which comes with an annual budget of $25 million, is part of “jobs-Here,” a government plan to create employment opportunities.

The plan gets a thumbs-up from Morley: “It hit a lot of the right buttons, with a focus on improving productivity and making investments in people. This is long overdue in Nova Scotia.”

Morley also sees opportunities in the network of universities that dot the province: “Those are tremendous resources that we haven’t tapped into fully.”

Ferley cautions the government not to overreact to slower growth. “Keep taxes low,” he advises. “There is a temptation to look to the tax side to deal with fiscal challenges.”

So far, the government is both resisting and giving in to that temptation. Last summer, it increased its portion of the harmonized sales tax by two percentage points, to 15% — the highest in the country.

But, as 2010 was coming to a close, the province announced a 10% reduction in Nova Scotia’s small-business corporate income tax rate. IE