OREANDA-NEWS. The economy is expected to contract in Newfoundland & Labrador this year, but growth will follow in 2017, according to the BMO Blue Book released today by BMO Capital Markets Economics and BMO Commercial Banking.

Much like the U.S. Federal Reserve's Beige Book, the BMO Blue Book combines the expertise of BMO's economists with information about current national and provincial business conditions provided to BMO's commercial bankers by local businesspeople.

"Real GDP is expected to contract by 2.0 per cent this year-among the weakest performances in Canada-after a 2.2 per cent decline in 2015," said Robert Kavcic, Senior Economist, BMO Capital Markets. "Longer term prospects are less dire, however based on our forecast for WTI oil grinding back toward $60 by the end of 2017, which should support longer-term development of the offshore sector and ease the strain on government finances."

"Newfoundland & Labrador's oil sector makes up roughly 22 per cent of provincial GDP and more than 7 per cent of employment-both shares are just slightly smaller than in Alberta," said Mr. Kavcic. "As a result, the slide in oil prices has hit incomes hard in the province. Production also continues to drift down after peaking in 2007, at least until the pipeline is filled with new output, such as Hebron in late-2017."

The report also notes that employment has been gradually declining since 2013, with retail sales slowing and average home prices down.

"Many businesses across Newfoundland & Labrador are facing great challenges with the decline in global energy prices," said Lynda Taylor, Senior Vice President, Atlantic Provinces Divisions, BMO Bank of Montreal. "The oil and gas industry is a big part of the province's economy. The bright side is oil fields are still operating viably because of low operational costs."

Meanwhile, the fishery industry in Newfoundland & Labrador, like the rest of Atlantic Canada, is experiencing a great upswing. "Rising global demand, strong catches and the favourable foreign exchange rate are letting those in the fishing industry drive growth across the province," said Ms. Taylor.

Ms. Taylor noted that BMO is here to help with a highly-skilled team of experts that can make lending decisions at the local level to help its commercial clients boost productivity, expand into new markets and make strategic investment decisions that will help propel growth and drive success.