Newfoundland and Labrador definitely in a recession, says MUN economist

An economist at Memorial University of Newfoundland says despite what politicians may be saying, the province's economy is in recession.

Last week, after delivering a grim provincial budget, Finance Minister Ross Wiseman said he wouldn't describe it that way.

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However, MUN economist Allison Coffin sees it differently, and said bydefinition the province is definitely going through a recession.

"Technically speaking yes, we are in a recession," she said. "When we define a recession, it's two successive quarters with negative growth of GDP we're there."

Coffin says it's not a surprise, as the number of goods and services that Newfoundland and Labrador produces has declined.

She points to the downturn in the oil and iron ore industries as key factors.

"Realistically the people who are affected most by this recession already know what's happening," she said.

"If you're in the oil and gas industry you know that jobs are very volatile."

Despite the negative connotations that surround the word, Coffin said that accepting that the province is indeed in a recession doesn't have to incite feelings of doom and gloom.

"Generally a recession is not a good thing," she said. "But if a recession is coming as a result of a slowdown in an economy after a huge acceleration in the economy, which is what we've just had ... maybe what we're going to see in the next few years, the next three or four years, as our economy starts to pick up, is more moderate growth at a more sustainable pace."

"Perhaps we'll see less pressure on housing prices to go up, and we may see less turnover in the labour market which is a very good thing for businesses."

The dangers of overreacting

Coffin said that governments should be cautious to not overreact during arecession, as radical cuts are often reactionary, and can be bad for the economy.

"If we slash and burn right now we create this enormous contractionary effect and that's not such a good thing as well," she said.

"Business would be very sorely upset about that as well."

With regards to the worries that some have that Newfoundland and Labrador's credit rating could be downgraded, Coffin said that all depends on how well the province avoids excessive borrowing.

"If we continue to borrow and we don't get our finances in order there's a very real possibility that our credit rating could be affected," she said.

"If we have a huge stream of revenue coming in from Hebron and from the Muskrat Falls project, then that's going to offset any problem with borrowing we have and will put us in a much more reasonable position down the road."