Economy flat this year
- 22 Jul 2016
- The StarPhoenix
- ALEX MACPHERSON
Economy still ‘suffering pretty badly’
Virtually no monetary growth expected this year, says Board
Saskatchewan’s economy contracted last year and is still “suffering pretty badly,” with virtually no growth expected in the province in 2016, according to a senior economist with the Conference Board of Canada.
“The main story for Saskatchewan is the weak employment picture, the weak wages in the overall Saskatchewan economy,” said Matthew Stewart, the national think tank’s associate director of economics.
“That’s pulling down the consumer sector. And when you combine that with the weak business investment and weak trade, it’s not a very positive picture, unfortunately.”
The provincial economy — which has been buffeted by extremely soft resource prices for more than a year — is expected to grow 0.3 per cent in 2016 and an additional 1.6 per cent in 2017, according to Stewart.
The Conference Board’s latest projections differ sharply from earlier estimates. Late last year, the think tank said it expected Saskatchewan’s economy to grow by two per cent in 2016 and 2.2 per cent in 2017.
“Due to the drop in crude oil prices and drought conditions over the summer months, Saskatchewan has had a tough year. However, the recession will be short-lived,” a Conference Board economist said in December.
Stewart attributed the revised projections to the same factors that led the Conference Board to downgrade its national growth forecast to 1.4 per cent from 1.6 per cent: the Fort McMurray fires, international economic uncertainty and reduced investment.
While the province’s long-term fundamentals are good and its agriculture sector is strong, Saskatchewan is facing an “imperfect storm” made up of weak commodity prices, challenges in Alberta and global uncertainty, Saskatchewan Chamber of Commerce CEO Steve McLellan said.
“When things are bad for your neighbours, geographically from a jurisdiction perspective or just down the street, people don’t spend money to the same extent.”
While GDP is far less important from an investment standpoint than each individual business’s balance sheet, uncertainty tends to create a “tight” mood, he added.
That mood has already affected job growth and investment in the province.
Employment in Saskatchewan has been declining for five straight months, and was down 1.2 per cent year-over-year in June, said statistician and Sask Trends Monitor publisher Doug Elliott.
At the same time, the province’s unemployment rate hit a 17-year high of 6.3 per cent in April and was 5.5 per cent last month, meaning 34,000 people were looking for work but unable to find it, according to Statistics Canada.
Investment is also down. Elliott said private sector spending grew from $7.8 billion in 2008 to a peak of $16.5 billion in 2014 before falling to $12.9 billion last year.
Spending on equipment and facilities is forecast to fall again in 2016, to $10 billion, meaning the province has “lost about five years worth of growth in the last two years,” he added.
The forecast is not unexpected, and will likely lead to reduced net migration and spending cutbacks, especially in the retail and housing sectors, according to the executive director of the International Centre for Northern Governance and Development.
“It’s tight, we’re running deficits, things are growing slowly,” Greg Poelzer said.
“However, we’re in a position that when we bounce back, we’re not bouncing back from a deep hole.”
Saskatchewan is better off than Alberta, and may be able to reap the rewards of reduced business costs.
Poelzer said the time is right for firms and the government to invest in First Nations-led initiatives and renewable energy sources.
A spokesman for the Ministry of the Economy said in an email that GDP estimates for 2016 average 1.9 per cent and multiple local, national and international firms are making, or are expected to make, large investments in the province over the next two years.
“While we are experiencing some challenges this year, we expect the province’s economy to rebound next year and we are encouraged the private sector continues to invest in Saskatchewan,” the spokesman said in the email.