Nunavut economic forecast predicts boom, followed by bust
Aging population may lead to territorial government deficits by 2018
Things are looking mostly up for Nunavut’s finances—at least for the next few years.
That’s when job creation and public spending likely won’t keep pace with the growth of the population by 2028, a situation that’s bound to worsen by 2040.
However, in 2018, the territory is on the cusp of an unprecedented economic growth spurt and a mining boom, says the recently released report, “Economic outlook for Nunavut, the Northwest Territories, and Yukon,” prepared by the Conference Board of Canada’s Centre for the North.
Its detailed forecasts, based on hundreds on indicators, show mining projects are poised to pump $2.6 billion worth of capital spending into Nunavut, with most of that coming before 2020.
At the same time, average wages and salaries per employee are expected to grow at a pace slightly above inflation.
And surging gold production will push Nunavut’s trade balance into a short-lived surplus in 2023, the report said.
But by 2028, the Nunavut government’s financial position is predicted to get weaker, and by 2040 the report’s forecast looks downright challenging, as the need for public services, such as health care and education, outstrips the territorial government’s ability to pay.
By 2040, Nunavut’s workers will be left with the responsibility of supporting a larger number of dependents than ever before, the report said.
This will accompany a growing demand for services which will force the Nunavut government to increase spending on health care every year by 5.1 per cent.
“At that pace, it will eat up one-quarter of the entire territorial budget in 2040,” said the authors, economists Stephen Spence and Daniel Lam, of the Nunavut section of the report.
“Our estimates show that without a change in federal transfers or in Nunavut’s tax system, the rising costs of supporting the territory’s young people and seniors will cause the government to slip into deficit after 2028.”
For now, it’s all fairly promising: metals markets are heating up, igniting renewed interest in Nunavut and Yukon the most, said the 80-page report.
Nunavut’s gold output will quadruple when mining capacity increases at Sabina Gold and Silver Corp., TMAC Resources Inc. and Agnico Eagle Ltd.
This will see Nunavut’s real gross domestic product grow 4.4 per cent in 2018 and 9.1 per cent in 2019, due to the new gold production.
Despite that growth, the report found the territory’s unemployment rate will remain higher than in the N.W.T. and Yukon, but will gradually decline, falling to 11.7 per cent in 2040.
“Still, Nunavut will continue to have the highest unemployment rate of any province or territory,” said the report, which notes the benefits of the boom won’t be shared equally.
Overall, the reliance on fly-in, fly-out workers for construction and mining jobs will limit job creation in the territory for Nunavut workers.
Only about one-quarter of the job gains forecast for the next five years will be filled by people living in Nunavut, the report said.
More than half of the 2,200 jobs created between now and 2021 will be in the mining sector, and less than half of those will be filled by workers from Nunavut, the report said.
From 2020 to 2040 nearly all job creation will come from the public sector as the government tries to ramp up its services in health care and education for the population of 19,300 school-aged residents and seniors, whose numbers will nearly triple by 2040.
“Without solid job creation outside the public sector, territorial revenues will struggle to keep up, eroding the budget balance,” the report said.
The report, which can be ordered online, proposes no solutions to the greater need for spending, although it suggests more money from the federal government or development in the territory will be necessary.