Second bank trims outlook for Sask. economy
SASKATOON Saskatchewan’s economy may be recovering from the shock delivered when oil and potash prices tanked, but it’s still set to underperform the national average for the fifth straight year, according to BMO Capital Markets.
Citing a range of factors, including high unemployment and the threat to agriculture posed by dry conditions, BMO on Wednesday became the latest bank to slash its 2018 economic forecast for the province.
BMO’S decision to cut its GDP growth projection to 1.5 per cent from 1.9 per cent follows that of RBC — currently the most optimistic of the banks — to cut its forecast to 2.4 per cent from the previously reported 2.9 per cent.
RBC Assistant Chief Economist Paul Ferley said he made the decision based on several factors, chief among them a slower than expected energy sector rebound compared to Alberta and weak, “flat to declining ” job growth.
And while RBC’S latest projection puts Saskatchewan ahead of the two per cent national average GDP forecast, Ferley pointed out that Saskatchewan is playing “catch-up” after two years of weak economic performance.
While CIBC and TD Economics opted to stick with their initial forecasts of 1.6 per cent and 2.1 per cent respectively, economic downgrades could be a problem for a government working to eradicate a deficit without adding to debt.
“The province when it’s in weak economic conditions … it does usually result in deterioration in terms of fiscal balances. As economic conditions improve, as a rule, you sort of want to see those fiscal imbalances start to improve,” Ferley said. “The rebound is still fairly tentative ... (so) it sort of argues that you don’t want to be too aggressive in terms of returning to fiscal rectitude so you don’t sort of unduly impair the economy as it’s starting to recover.”
The Saskatchewan Party government, which is entering the final frame of a three-year-plan to eliminate a $1.2 billion deficit, finished the year $303 million in the red — less than expected, largely because of lower crop insurance payouts.
On Wednesday, Finance Minister Donna Harpauer acknowledged there are several reasons to be cautious about Saskatchewan’s economy, among them deep trade uncertainty and the ongoing carbon pricing dispute.
While the government’s plan to eliminate the deficit remains “on track,” it is important to remain cautious and not fall into the trap of thinking it’s a sure thing and suddenly spending more than had previously been decided on, Harpauer added.
“The budget as was shown to public accounts is heading in the right direction and there is a lot of strength in what our decisions, our very hard decisions, are playing out in helping out the province get back to balance.
“But it is still not a cakewalk and we still have to have a lot of caution going forward because we don’t know what’s going to happen to our economy.”