by Melissa Dunne, Telegraph-Journal
New Brunswick is well on its way to becoming a leading regional energy hub, according to economists.
“The province has already emerged somewhat as a regional energy hub and, especially if the second (Irving Oil) oil refinery is built, it’s on its way to becoming a leader,” Amy Goldbloom, an economist with RBC Financial Group, said Friday as RBC released its latest growth forecast for the Canadian economy.
Canada’s economy is expected to grow a solid 2.6 per cent this year, then 2.9 per cent next year, according to RBC. And it is predicting that New Brunswick’s near term economic growth is expected to remain close to 2.5 per cent through the end of 2008, trail slightly the national average.
The Canaport liquefied national gas terminal in Saint John, which is about 30 per cent complete and on schedule to start up in late 2008, is leading the New Brunswick energy surge.
And with a second refinery in Saint John and a second nuclear reactor at Point Lepreau looking more and more like they will come to fruition, New Brunswick may soon have more energy than it needs, said Goldbloom.
Charles Cirtwill, acting president of the Atlantic Institute for Market Studies, also predicts the future will be rosy for N.B.’s energy hub.
“I think New Brunswick is already emerged as an energy hub and this will just increase,” Cirtwill said Friday.
“There will be spinoffs from the energy hub, for example in Saint John there could be new construction jobs and that in turn would bring more hotel and restaurant jobs as well.”
Also, with easy access to numerous energy sources the province will be able to attract other industries that can operate with lower energy costs.
“The energy sector drives more spinoffs than manufacturing,” said Cirtwill, who is based in Halifax.
“There is a lot of potential in New Brunswick – maybe you guys will be crying for equalization soon, too.”
The premiers of Nova Scotia, Newfoundland and Labrador, and Saskatchewan were embroiled in a fiery debate since the March federal budget altered the Atlantic accords, which protect their offshore oil and gas revenue from being clawed back under the federal equalization program. The Liberal-dominated Senate passed the Conservative government’s controversial budget bill Friday.
The picture is not quite as rosy for N.B.’s export sector.
The export sector dropped 1.4 per cent last year and that trend is likely to persist to the end of this year, RBC predicted. The drop is a result of a decreased demand for non-energy exports due to the stronger Canadian dollar and a soft U.S. housing markets.
“The forestry sector is suffering the most because of the high dollar,” said David Plante, vice-president of the New Brunswick division for Canadian Manufacturers and Exporters.
“Forestry is in a crisis mode right now.”
RBC is predicting that the loonie will keep climbing this year to about 94 cents, while CIBC has predicted the loonie will reach parity with the U.S. dollar by year’s end. The loonie has not been at parity with the U.S. currency since 1976. The Canadian dollar closed Friday at 93.49 cents US, up 0.44 cents from Thursday. By the end of 2008, Goldbloom said, the loonie should be back down to about 89 cents, which should help the export market recover gradually.
However, Plante worries that may too late for the industry and says the Bank of Canada needs to raise the interest rates next month. Recent speculation suggests that bank Governor David Dodge may not raise rates after new statistics reveal Canada’s economy is not as red-hot as previously thought. Statistics Canada shows that core inflation, which hit a four-year high of 2.5 per cent in April, was back down to early in May, hovering just above the bank’s two per cent target at 2.2 per cent.
“What that decline in forestry says for New Brunswick is there is a transition that they knew was coming away from forestry, there has been a global decline in the sector for a while,” said Cirtwill.
“New Brunswick has been very successful at diversifying their economy, it’s actually a very nice situation to have such a diversified economy.”