SOMBA K'E/YELLOWKNIFE - A new report is predicting economic growth this year in the NWT, after a significant decline in 2009.

The Conference Board of Canada says an increase in diamond mining activity will lead to an increase in the NWT's gross domestic product in 2010. Above, the A154 open pit at the Rio Tinto Diavik Diamond Mine. - NNSL file photo

The Conference Board of Canada forecasts the NWT's gross domestic product (GDP) will increase by 1.5 per cent in 2010.

That contrasts to a -9.5 per cent in decrease in the territory's GDP in 2009, which followed a -6.3 per cent decline in 2008.

"It's because the diamond industry pulled it down in 2009," said Marie-Christine Bernard, associate director of forecasting and analysis with the Conference Board of Canada, an independent, not-for-profit research organization.

According to the board, last year's global economic downturn led to lower prices and less demand for jewelry-quality diamonds, prompting producers to scale back mining activities in the NWT. That caused the territory's economy to contract significantly.

The GDP is expected to rise because diamond prices and sales are on the rise again, due to increased demand primarily from India and other parts of Asia.

While there will be more diamond mining activity, Bernard said there won't be any major increase in construction this year in the NWT.

"That's why we're not seeing a big rebound," she said.

The NWT's economy is slowly coming back, she added. "It's better than another year of negative growth."

The gross domestic product is the total value of goods produced and services provided within a jurisdiction.

For 2010, the Northwest Territories' GDP is forecast to be $3.434 billion, compared to $3.382 billion in 2009.

The GNWT is also predicting the territory's GDP will increase in 2010, but came to that conclusion through a different route.

"We're forecasting growth of 9.5 per cent," said Margaret Melhorn, the deputy minister of Finance.

Melhorn explained the predictions differ because the territorial government had the GDP declining by -16.5 per cent in 2009, compared to the Conference Board's -9.5 per cent.

"We went deeper," she said. "So our recovery is steeper than theirs. Their recovery was shallower because their decline was shallower."

The numbers for 2010 from the board and the GNWT come closer together with the GDP estimates - the government is projecting $3.3 billion, while the board is forecasting $3.4 billion.

"We ended up in the same spots," Melhorn said. "We just took different routes to get there."

She said the difference might be because the GNWT was using more recent data.

"Either way, we're forecasting the economy will grow in 2010," she said, adding people should not get too hung up on the numbers.

The government and the board also agree the recovery will be driven by improvements in the diamond mining industry.

Mike Vaydik, general manager of the NWT and Nunavut Chamber of Mines, is not excited by the Conference Board's GDP prediction for this year.

"One-point-five per cent growth is pretty small by the territory's experience," he said. "It's been in the double digits."

In 2007, the territory had a GDP increase of 11.3 per cent.

Vaydik said the Chamber of Mines has been warning the territorial government that the boom times in diamond mining are coming to an end, possibly by as early as 2012, and the NWT needs to get more mines into production.

A slowdown in mining will negatively affect other aspects of the economy, such as construction and transportation, he said.

While the diamond markets have recovered somewhat since last year, Vaydik said the crucial period is from Christmas to Valentine's Day. "That will be the bellwether of how the diamond industry will go."

Bernard said diamond mining has such a big influence on the NWT's economy because 35 per cent of the territory's economy depends on mining/energy, mostly diamond mining.

"That's a big percentage," she said.

The Conference Board's prediction for all of Canada is GDP growth of 2.8 per cent in 2010. That figure compares to a national decline last year of -3.1 per cent. The board is also predicting growth for the Yukon and Nunavut this year.

"All three territories are expected to bounce back this year, as mining activity recovers in line with stronger commodity prices," said Bernard.