[HALIFAX, NS] - Businesses across Nova Scotia — not just those in Halifax — will benefit from the $25-billion federal shipbuilding contract awarded last month to Halifax Shipyard, but the big money won't start rolling in until 2013, says a new forecast from TD Economics.
The report released Monday says the provincial economy can expect modest improvement next year, but the real benefits will appear the following year when the project is expected to generate $228 million in real GDP while cranking out 3,200 net new jobs.
"With many details still pending and negotiations underway, it is too early to quantify the long-term benefits associated with the shipbuilding contract," the report says. "Regardless, this new project appears likely to create many thousands of new high-paying jobs over the next 20 or 30 years."
Over the next two years, the province's jobless rate is expected to drop from 9.1 per cent to 8.5 per cent, the study says. As well, new home construction is expected to jump to 5,200 units in 2013, up from 4,400 in 2010. And the average cost of a home is forecast to rise from $206,000 in 2010 to $214,000 in 2013.
"In a provincial economy that is $34 billion in size, the shipbuilding contract should have sizable ripple impacts," the study concludes.
The author of the report, TD economist Sonya Gulati, says her forecast should come as good news to the province's majority NDP government, which will likely go to the polls in 2013 — the fourth year of a five-year mandate.
"If it stumbles getting out of the gate and the project gets delayed, that may not necessarily be the case," Gulati said in an interview. "But from all documents I reviewed, 2013 should be a really good year in terms of economic prospects, so that might feed into the election cycle."
Her study suggests that the benefits of the project will extend beyond Halifax because a large number of the province's manufacturing, research, engineering and consulting firms are located outside the capital city, according to data from Statistics Canada.
As well, federal procurement rules state that a substantial amount of work must be given to small- and medium-sized enterprises.
Before the contract was awarded, the Conference Board of Canada released a study that said the project could create up to 11,500 jobs during the peak production phase between 2018 and 2020.
Gulati said those numbers are plausible, but she said she didn't have enough data to back that claim.
While the shipbuilding contract has boosted consumer confidence in Nova Scotia, the good news has been tempered by the September shutdown of the NewPage paper mill in Cape Breton, which cost the province about 1,000 jobs.
Bidders have come forward to buy the mill, but it remains unclear whether it will reopen. As well, there are concerns the Bowater Mersey mill near Liverpool could close by the end of the year. About 2,000 people along Nova Scotia's south shore would be affected if the mill closes.
The $25-billion contract, awarded to Irving Shipbuilding Inc. of Halifax, calls for construction of about 20 vessels, including frigates, destroyers and patrol ships.
Seaspan Marine Corp. in British Columbia was awarded an $8-billion contract to build non-combat vessels.
The TD Economics report came the same day that the Atlantic Provinces Economic Council released a gloomy study that predicts limited economic growth for the entire region next year.
In its annual economic outlook, the Halifax-based think-tank says it expects to see a slowing housing market and a drop in government spending in 2012.
As well, the council says Nova Scotia's job market has been stuck in neutral for several years with no net job growth since early 2008.
However, the council says the shipbuilding contract will have a considerable impact on the Nova Scotia economy starting in 2012 as capital investment ramps up for construction of a new assembly hall and launch at the shipyard.
"We just think it's going to take a bit longer for the contract to be negotiated and capital expenditures to start," said David Chaundy, a senior economist with the council. "So we're going to see some activity in 2012, but picking up more in 2013 and beyond."
The council's forecast says Nova Scotia's real GDP will grow by 1.2 per cent in 2012. TD Economics is forecasting growth of 1.4 per cent.