A New Brunswick economist believes Newfoundland and Labrador is contending with a "perfect storm" financially and could face bankruptcy.

"I've heard the term 'crisis' being bandied about and I would say I agree with that," said Richard Saillant, the director general of the Canadian Institute for Research on Public Policy at the University of Moncton.

Saillant said two main factors are contributing to the the perfect storm — the price of oil, and a quickly aging population.

"What that means, essentially, is that economic growth will slow down considerably while public spending needs will shoot up dramatically in the years ahead."

Saillant believes that unless the province takes significant steps now to manage the fiscal situation, it could go bankrupt.

"Bankruptcy is absolutely a possibility," he said.

Saillant believes if the situation continues unchecked the province could face a downgrade in its credit rating. Then, if investors are no longer sure the province can pay its debt, it would be frozen in credit markets.

"You're essentially not capable of controlling your own destiny. That's the definition in a sense of being bankrupt." said Saillant.

Curtail spending

According to Saillant, the government can raise taxes and reduce spending to offset the financial pressures.

"Newfoundland has an inflated spending base. On a per capita basis Newfoundland spends 30 per cent more than the average of Canadian provinces," he said

Saillant admitted some of that is due to geography and demographics, but he said about a decade ago the province spent only 10 percent more than the Canadian average.

He believes the spending bonanza was due to the "wealth effect".

"As you feel wealthier, you spend more...now Newfoundlanders will have to live within [its] means," he said.

Saillant said the province also has to raise more revenues to get itself out of the fiscal mess.

However, Premier Dwight Ball cancelled the HST hike planned to take effect this month and he's consistently said there won't be public sector layoffs.

"I think the Premier, if that's the plan and that's the way he intends to proceed, he's putting his head in the sand," said Saillant.

Government must act now

He believes the measures needed now to get the province on the right economic track are much less drastic than what would be needed five or 10 years down the road if nothing is done.

"Newfoundland needs to act boldly and act now," said Saillant.

On Tuesday, the province announced a 15-month strategy to canvas residents about their ideas for managing the dismal economic situation.

Saillant doesn't have much confidence in that process. Considering the current situation, he said Newfoundland doesn't have that kind of time to play with.

In addition, he said, it's not likely to produce valuable results.

"I'm really concerned that the elephant will only deliver a mouse," he said. "You create a festival of objections and you have a bunch of private interests who will essentially give very convincing reasons why we shouldn't affect them in their own backyard."

"The Premier has to rise above that and speak to the broader public interest of Newfoundlanders."