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A contraction of the Northwest Territories economy has been forecast for this year by the Conference Board of Canada.

The Inuvik school replacement project for the GNWT's Department of Public Works and Services is expected to be complete by 2013. Slowing government infrastructure spending is a factor in a projected 30 per cent drop in construction output this year, according to the Conference Board of Canada. - NNSL archive photo

In the most recent edition of the board's biannual publication Territorial Outlook, on the economic and fiscal outlook for the three territories, a contraction of 2.3 per cent for the NWT economy is projected, due to a "significant downturn" in the construction sector and minimal growth in the mining industry. Construction output is forecast to fall by nearly 30 per cent this year, the board found.

"Thirty per cent is not that bad because we thought it was going to be a lot worse," said Phil Moon Son, executive director of the NWT Construction Association. He noted the organization pegged this year's decline in construction output at 50 per cent.

The decline in the construction sector is largely a reflection of slowing government infrastructure spending, conference board associate director Marie-Christine Bernard said, following major government investments in the past few years aimed at combating the recession, including the $95-million construction of Inuvik's "super school," scheduled to open in 2013.

"You can't go on with stimulus like that forever," Bernard said.

The construction industry is expected to bounce back next year due to spending at the Ekati diamond mine's Misery open-pit project, although declining output at Ekati will restrain the territory's economic performance over the medium term, the board said.

"A lot of the weakness is coming from the mining industry because of the maturity of the diamond industry in the Northwest Territories," Bernard said, noting mining makes up roughly a third of the territory's gross domestic product. "We're not expecting a lot of growth for that sector which did contribute quite strongly to growth before."

Compared to exploration spending in the other two territories, the NWT "has not really come back strong after the recession, and there is not many projects on the horizon right now," Bernard said, despite high demand for minerals in global markets.

Nunavut, however, is entering a period of sustained growth in its mining industry, the board said, with rising production at the Meadowbank gold mine, the development of the Hope Bay mine and record levels of mineral exploration spending expected to drive economic growth in the territory. A gain of 15.7 per cent to Nunavut's gross domestic product is expected this year, following growth last year of 14.8 per cent.

Bernard attributed the "modest" growth in the NWT's mining industry compared to the other territories to the mining cycle, which has reached maturity in the NWT with production expected to wane over the next four years.

"It's not always going to be boom time in Yukon and Nunavut either," Bernard said, noting the economies of the territories are "prone to sharp rise-and-falls" as mining projects move through the cycle to closure phases when the mines are exhausted.

NWT and Nunavut Chamber of Mines executive director Tom Hoefer said the industry cycles more around commodity prices, and a decline in the NWT's mining industry is mostly due to recurring issues with the territory's regulatory environment.

"When we're looking at a very hot commodity market in the world and looking at the Canadian exploration industry, you can see it's booming in all jurisdictions except the Northwest Territories," Hoefer said. "When it's hot and you're not taking advantage of it, that can tell us there is something wrong."

However, Hoefer noted encouraging steps are being made to improve the regulatory system in the territory, including a recent memorandum of understanding signed with the chamber and the Akaitcho First Nations, and efforts by Aboriginal Affairs and Northern Development Canada to improve the Mackenzie Valley Resource Management Act.

"There is cause for concern, but also reasons for optimism," Hoefer said.

Territorial Outlook is produced as part of the conference board's Centre for the North, which aims to help implement strategies, policies and practices toward achieving sustainable prosperity in the North.

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