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NORTHWEST TERRITORIES
Gross domestic product in the NWT dropped 5.1 per cent in 2011, the largest decrease in Canada.

NWT gross domestic product is strongly influenced by diamond production, including those produced at the Ekati Diamond Mine, located 310 km northeast of Yellowknife. - NNSL file photo

"Any drop in GDP obviously affects the territory greatly," said Hughie Graham, president of the NWT Chamber of Commerce. "You're going to need to take a look at where the drop mostly comes from and I would say in 2011 it comes from the lowering of the quantity in production of diamonds."

A report on GDP statistics from Statistics Canada agrees, stating NWT exports dropped 7.2 per cent in 2011 "as a result of lower diamond shipments to other countries."

The report also indicates a decline in business investment by 7.8 per cent and shows the weakest increase in customer spending in Canada, at 1.2 per cent.

"The decline that Stats Canada is reporting is an important reminder that we are a resource-based economy and our economic strength lies in the production of minerals and oil and gas," stated Tom Hoeffer, executive director of the NWT and Nunavut Chamber of Mines. "That production is maturing and we need to renew it with more exploration and by seeing new mines built."

Diavik's transition from open-pit to underground mining was a major source of diamond production decline, according to Graham's observations and according to the Conference Board of Canada, a national independent and non-profit research organization.

The organization predicts a GDP increase of five per cent in 2012, followed by a 0.7 per cent drop in 2013, and a one per cent drop in 2014.

"From 2013 to 2015 (Diavik Diamond Mine has) planned reductions," said Jacqueline Paladini, an economist with the Conference Board of Canada. "There's also the Ekati mine. They're slowly winding down, so we don't expect that mine to contribute to growth. That's why we see the decline in GDP over the medium term.

"On a brighter note, we do expect this declining trend will turn around more around 2015 to 2016 with the opening of several new metal mines."

A Natural Resources Canada's survey of exploration companies expenditures in 2011 and 2012 shows some optimism as well, reporting a 44 per cent increase in 2012 exploration expenditures over 2011.

Graham said while 2012 numbers look promising, the economic forecasts are indications of how important exploration is for the territory's economic stability.

"(Exploration) is not pre-recession levels or anything, but it is up, so that's encouraging," said Graham. "We need to continue to encourage exploration because without exploration ... we don't have the next big project. We haven't had a project permitted in 10 years, so we're going to continue this boom-bust cycle that we're on. We need regulatory reform. We need to encourage exploration."

The Conference Board of Canada completes economic forecasts twice per year and expects to release an updated version in 2013.

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