For Immediate Release
HALIFAX – Newfoundland and Labrador is in a challenging economic and fiscal situation triggered by the substantial drop in oil prices in 2020. APEC’s latest Commentary provides an independent perspective on the province’s challenges and outlines priorities for how to move forward.
“The offshore oil industry is the largest contributor to economic prosperity in Newfoundland and Labrador,” says David Chaundy, APEC’s President and CEO. “The collapse in oil prices in 2020 will lead to a significant reduction in royalties this fiscal year and created uncertainty about further investments in its offshore.”
The challenges facing the offshore oil industry are in addition to other vulnerabilities facing the provincial economy and expose its high dependence upon a small number of exports. “The province has long had the least diversified economy in Canada,” says Chaundy. “Five product groups account for 95% of the province’s exports.”
The province is facing a huge fiscal challenge with a large deficit, high and rising debt, and debt payments that are higher than any other province at just over $2,000 per person. Provincial program spending is the highest in the country on a per capita basis and provincial tax rates are relatively high.
“The province needs to develop a plan to sustainably manage its finances going forward as a portion of its revenue base is likely to remain tied to variable natural resource revenues,” says Chaundy. “This means ensuring its annual program spending is based on long-term sustainable revenues and then developing a multi-year plan to return to balance.”
APEC’s report also emphasizes the need to create the conditions for the private sector to grow and prosper. The sustainable development of natural resources is critical to the province’s medium-term economic prospects, particularly its offshore energy and mineral resources. The growth of existing and developing non-resource industries, and the creation and scale-up of firms in sectors such as digital and ocean technology, will support long-term prosperity and help diversify the economy, but will take time to produce substantive results.
A full copy of the Commentary is available on APEC’s website.
To arrange an interview with David Chaundy, please contact:
Communications Manager, APEC
Mobile: 902.877.2159 / E-mail: firstname.lastname@example.org