Liberals hope Nova Scotia stays in economic sweet spot

It's no comfort if you work at a manufacturer that is closing down like the Saputo plant in Sydney but parts of Nova Scotia's economy did well last year and that's expected to continue in 2016.

Premier Stephen McNeil is counting on it.His promised balanced budget rests on continued economic growth.

The Liberals' forecast for the coming year predicts the economy will grow by 2.6 per cent, create 2,700 new jobs and generate an additional $234 million in tax revenue.

"The numbers look reasonable to me. I'm not seeing anything jump out at me in their forecast that is overly optimistic, or conservative for that matter," said Fred Bergman, of the non-partisan Atlantic Provinces Economic Council.

Exports going gangbusters

In 2015, lower oil prices and a huge devaluation of the Canadian dollar made Nova Scotian exports more competitive in international markets.

Displaced oil patch workers actually stemmed the tide of out-migration last year.

Non-energy exports such as Michelin tires, paper, forestry products and seafood jumped 12.9 per cent in 2015.

Retail sales were up 3.2 per cent, led by a nearly seven per cent gain in the value of new motor vehicle sales think of all those brand new, big pickup trucks at the wharves. Manufacturing shipments led the country in growth at 6.4 per cent.

Lobster and lumber leading

In January and February this year, Bergman said exports grew 10 per cent with lobster and lumber leading the way.

"Exports have been going like gang busters," he said. "Ten per cent growth is going to have a positive impact. It will show up in corporate income tax revenues."

The provincial Department of Finance predicts overall exports will grow by 4.7 per cent in 2016, before dropping to 2.9 per cent in 2017.

How long does it last?

Both the Department of Finance and Bergman a department alumnus see a tapering off next year. Government revenue growth is forecast to drop from 2.8 per cent in 2016 to just one per cent in 2017.

Bergman speculates that may reflect changes in federal funding for health care that go into effect in 2017-18.

This is the final year of a formula that had a six per cent escalator built into it. Next year, the floor is set at three per cent.

Ian Johnson, of the public sector union-funded Nova Scotia Health Coalition, said the financial consequences are serious.

"We are predicting this could cost Nova Scotia as much as $1 billion over 10 years," Johnson said.

Risk factors

Some major projects whose cranes have dotted the Halifax skyline and boosted the economy are also coming to an end.

In addition, the continued retirement of baby boomers will limit employment growth.

The government also warns it may have to absorb further costs associated with the decommissioning of the Sable Offshore natural gas project.

Last year, Nova Scotia was stuck with an $83-million bill from Exxon and its partners, single-handedly driving the province into a $71 million deficit in 2015 and 2016.

Opponents dismiss the forecast

Meanwhile, opposition politicians including Progressive Conservative leader Jamie Baillie say the forecast for the coming year is far too rosy.

"They are inflating the amount of taxes they are going to get. That will absolutely not happen," Baillie said.

"There's no more Nova Scotians today than there were yesterday. They aren't making any more money today than they were yesterday. There are no more jobs today than there was yesterday and we are supposed to believe all this money is going to come raining down."