BMO Economics: PEI Economy Experiencing Sturdy Growth

CHARLOTTETOWN, PRINCE EDWARD ISLAND--(Marketwire - Jan. 17, 2013) - The Prince Edward Island economy is growing at a sturdy pace, according to the Provincial Monitor report released today by BMO Economics. Real GDP expected to rise 1.5 per cent in 2013.

"Exports continue to perform well, up 25 per cent year-over-year through October, led by a surge in aerospace shipments," said Robert Kavcic, Senior Economist, BMO Capital Markets. "The Province also recently announced that the Aerospace Tax Rebate Program for companies maintaining 20 employees on a payroll in excess of $700,000 a year will be extended for another 10 years."

"Businesses in the province continue to be cautiously optimistic. They are making targeted business investments to strengthen their productivity and future growth prospects," said Allison Hakomaki, District Vice President, New Brunswick and PEI, BMO Bank of Montreal.

While down from a 1.8 per cent pace in 2011, population expanded a still-solid 1.1 per cent in 2012. "This level of expansion is supporting consumer spending and housing, albeit at a cooler pace," noted Mr. Kavcic. "Job growth was decent at 1.0 per cent in 2012, as solid gains in the private sector - mainly in the service sector - outweighed cuts in the public sector. At 11.0 per cent, the province's jobless rate ended 2012 in line with the average of the past three years, and it's expected to hold steady through the forecast horizon."

Public-sector capital spending is projected to cool in the years ahead as the Province shifts its focus to fiscal restraint. The latest capital plan calls for a net $69.5 million in spending in fiscal 2013-2014, down from the latest estimate of $89.5 million in fiscal 2012-2013, and it will gradually fall further to $52 million by fiscal 2015-2016. Real institutional & government construction was down more than 27 per cent year-over-year through the third quarter of 2012, offsetting solid growth in the industrial space.

The Province of Prince Edward Island revised up its deficit projection to $79.6 million (1.5 per cent of GDP) in fiscal 2012-2013, versus $74.9 million estimated in the budget. The modestly worse position comes as a $12.3 million revenue downgrade outweighs a $7.6 million reduction in spending, relative to the budget plan. The Province is targeting fiscal 2014-2015 for a balanced budget through a combination of spending restraint and additional revenues raised through the harmonization of its sales tax with the Federal government.

The full Provincial Monitor can be downloaded at www.bmocm.com/economics.

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Established in 1817 as Bank of Montreal, BMO Financial Group is a highly diversified North American financial services organization. With total assets of $525 billion as at October 31, 2012, and more than 46,000 employees, BMO Financial Group provides a broad range of retail banking, wealth management and investment banking products and solutions.