New Brunswick faces improving economic outlook in 2016

New Brunswick's economy is poised to make a modest recovery in 2016 as some of the province's traditional industrial players are set to capitalize on a rebounding U.S. housing market.

Three economists were asked by CBC News to offer their own predictions for the greatest challenges and opportunities facing the province in the new year.

Each economist offered reasons for cautious optimism but much of that is based on how poorly the economy performed in recent years.

While many other provincial economies have turned around since the 2008 recession, New Brunswick has never fully recovered.

There were 367,000 jobs in the province when the recession hit compared to the 352,500 jobs that were in New Brunswick in November 2015, according to Statistics Canada.

So, what is in store for New Brunswick economy in 2016?

1. What is the biggest economic challenge?

New Brunswick is emerging out of four years of slow growth but the path to a full recovery is hardly clear.

Marie-Christine Bernard, the associate director of provincial forecasts with the Conference Board of Canada, said New Brunswick companies trying to export around the world are going to have to deal with depressed prices.

"There is a lot of supply of many of the commodities that New Brunswick produces. There is a lot of supply on world markets so that could weigh on prices," Bernard said.

David Chaundy, the senior economist for the Atlantic Provinces Economic Council, said he sees two primary obstacles in New Brunswick's path to economic recovery in 2016.

He said it will be a challenge to get smaller companies in less traditional industries to grow.

Another challenge will be self-induced. The provincial government's fiscal problems could also be a drag on the economy.

Premier Brian Gallant's Liberal government is promising to put in place significant cuts and revenue-boosting measures to erase the $600-million structural deficit in the spring budget.

Chaundy said Finance Minister Roger Melanson's task will be to deliver the appropriate dose of fiscal tonic that will cure the province's financial ills but not further damage a weak economy.

"We do have to make some changes but it is trying do that in a way that allows you to get to that point without causing too much further damage in the short term. I think that is the biggest challenge the province is facing," he said.

The finance minister's ability to walk the fine line between correcting the province's fiscal situation and further damaging the fragile recovery will be key, according to another economist.

Craig Alexander, the vice-president of economic analysis at the C.D. Howe Institute, said the fiscal rebalancing will be a significant, but needed, headwind on the economy.

"I think that is a difficult balancing act. I think when an economy is relatively fragile but a government needs to address its fiscal balance, I think you need to lay out a roadmap that says how you are going to get there," Alexander said.

"That road map is about not being too heavy handed and contributing unduly to economic weakness."

2. What is the biggest opportunity?

Each of the economists say the New Brunswick government can thank a heating up U.S. economy for many of the economic opportunities that could be on the horizon.

The U.S. economy is expected to continue to improve, a belief that was emboldened by the Federal Reserve's decision to raise its benchmark rate in December by a quarter of a percentage point for the first time since 2006.

Stronger U.S. demand means Americans will be ready to buy more products from Canadian suppliers and they will have more financial capacity to do that because of the lower Canadian dollar.

C.D. Howe's Alexander said the low loonie could boost Canada's export competitiveness into the United States. He said he would not be surprised to see the Canadian dollar sink below 70 cents US in 2016 and that will help New Brunswick businesses selling into the region.

"There is going to be a lot of the improvement that we will see in the New Brunswick economy, I think will come from export-led growth that will lead to benefits in the domestic economy," Alexander said.

The Conference Board's Bernard said she expects the forestry and manufacturing sectors to see the largest gains in the United States as that economy continues to pick up steam.

But that rising U.S. economic tide will lift other businesses in New Brunswick as well.

"When those industrial sectors are doing well, that tends to help the service side of the economy as well," she said.

While traditional sectors stand to see growth in 2016, one economist also said smaller companies could also be poised for a strong year.

APEC's Chaundy said it is also important to watch smaller, emerging companies, particularly in the technology sector.

"They are doing some wonderful things, they are relatively small in the aggregate export picture at the moment," he said

"It takes time for those firms to develop and to grow and to start and impact those aggregate statistics."

3. How will N.B. compare to other Atlantic provinces?

New Brunswick's economy is expected to grow in 2016, which is positive compared to previous years, but it will not be enough to set it apart from other neighbouring provinces.

APEC's latest snapshot of Atlantic Canadian economies projects New Brunswick to grow by about one per cent, which is above Newfoundland and Labrador's 0.8 per cent growth. But it is behind Nova Scotia's forecasted 1.5 per cent and Prince Edward Island's 1.3 per cent growth.

The C.D. Howe Institute is projecting New Brunswick's growth to be at about 1.2 per cent compared to Nova Scotia and Prince Edward Island's 1.5 per cent. The institute is projecting Newfoundland and Labrador's economy to contract.

The Conference Board of Canada features the strongest growth estimate for New Brunswick at 1.6 per cent, which is tied with Prince Edward Island. The Conference Board projects Nova Scotia to grow by 2.3 per cent, while Newfoundland and Labrador's economy is expected to shrink by 0.8 per cent.

"I think what we are going to find is New Brunswick incrementally see growth rate improve to a rate that is quite favourable," said Alexander of the C.D. Howe Institute.

"When you start doing comparisons though, how is New Brunswick going to do relative to the Canadian average, the growth rate in Canada is going to be 1.7 [per cent] and New Brunswick is going to be well below that."

4. Overall, how will New Brunswick's economy perform?

The three economists are offering some cautious optimism for the New Brunswick economy, but it comes with a caveat.

The Conference Board's Bernard said New Brunswick's last four years of no growth is "pretty miserable," so by comparison, 2016 should end up being positive.

"I think it is going to grow moderately but that is still good performance given that the economy did not grow very much between 2010 and 2014," she said.

"I think you should be looking with optimism for 2016. It is not the strongest province. I think it will be below the national average but I think it will still be a good performance if we are able to see a pick up in job creation, that is probably the weakest link right now in the economy."

When looking at the overall economic picture for New Brunswick, APEC's Chaundy said 2016 should be a positive year for the province.

"I don't think it's certainly going to be next year everything looks rosy and all the issues are resolved, I don't see it happening that quickly," Chaundy said.

"But again I think there are a lot of positive things happening and it is trying to nurture and nourish and accelerate some of those positive changes."

Even though the economy should be showing signs of life in 2016, C.D. Howe's Alexander said that doesn't mean people will be thrilled with the province's economic performance.

When a provincial economy is lagging behind the national growth trend then it will feel like times are tough.

"It is still going to feel like things are constrained and that is a reflection that it often feels worse than it is," Alexander said.