Balanced budget plans in jeopardy: academic

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This article was published 29/05/2017 (2132 days ago), so information in it may no longer be current.

The Pallister government’s hopes of balancing the provincial budget within the next four or five years could be in jeopardy if the Conference Board of Canada’s latest provincial economic forecast proves accurate, according to a prominent local academic.

In its Spring 2017 Provincial Outlook report released on Monday, the Ottawa based think-tank predicts while the Manitoba economy will grow by a solid 2.1 per cent this year, it will average just one per cent growth for the four years after that.

Michael Benarroch, dean of the University of Manitoba’s Asper School of Business, said the board’s growth forecast for the 2018-to-2021 period may be too pessimistic.

“But I can tell you that if we go down to one per cent, that will be a disaster for Manitoba’s finances,” he added, “because the government has been assuming that if they can hold the line on expenditures to around three per cent and they can get economic growth of around two per cent, they can balance the budget in four or five years.”

The Conference Board cited two reasons why it believes Manitoba’s economic growth will be so tepid after this year.

One is that Manitoba Hydro’s investments in two big mega projects — the Keeyask Generating Station and Bipole 3 transmission line — will begin declining after this year, with both projects slated to be completed by 2021.

At the same time, two of HudBay Minerals’s biggest mines in northern Manitoba will be closing and Vale Canada’s smelting and refining operations in Thompson also will be shutting down, it added.

Marie-Christine Bernard, the board’s associate director of provincial forecasts, said she’s not aware of any new mines that are slated to open in Manitoba that would help to offset the loss of those other operations.

“Maybe in the future we’ll get some new mines, but not right away,” she added.

“So we don’t have anything to make up for those other mines closing for now.”

This means the province’s metal-mining industry will shrink to a fraction of its current size by 2021.

Benarroch also noted Manitoba Hydro and Great-West Lifeco recently announced they were cutting hundreds of local jobs.

“So there have been some hits in some really important sectors of our economy,” he said, “and if we keep piling these up it is going to be difficult going forward.”

He said he hopes the private sector will fill some of the void by boosting its spending on infrastructure projects.

Also, the Alberta and Saskatchewan economies are rebounding, he added, “and I think that’s going to carry us a little bit because they’re going to start purchasing more from us.”

But he noted government austerity does have a negative impact on economic growth, so the province will need to tread carefully over the next few years.

“We have to monitor it (the economy) very closely, because if we choke off all growth we’ll never balance (the budget)…” he said.

The Conference Board noted in its forecast the Manitoba economy does have some good things going for it in 2017.

It said the Keeyask and Bipole III projects will help keep the construction industry humming this year, “and the manufacturing sector will remain a vital driver of growth for the province, with added capacity at Maple Leaf Foods’ bacon processing plant boosting total output of meat products.”

It also noted that transportation-equipment manufacturing remains a bright spot for the province, with an ongoing demand for both transit buses and aerospace parts and products.

The board also predicts Manitobans will see their incomes continue to improve over the next two years, with wages and salaries expected to rise 1.9 per cent this year and 2.5 per cent in 2018.

“Despite losses in the mining sector, Manitoba will add an average of 3,500 jobs per year between 2017 and 2021,” it said, “which, coupled with solid population growth, will fuel healthy demand in the service sector.”

murray.mcneill@freepress.mb.ca