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Quarter 1-2020 Economic Snapshot and Outlook

The Government of Saskatchewan release on April 23rd of the Re-Open Saskatchewan Plan is a welcome step in the right direction for many in the Saskatoon Region. By giving us a path to gradually return to some level of normality, the province has provided necessary guidance in an uncertain time. The plan, however, is not a reason to become complacent. We still have a lot more work to do. The Saskatoon Region economy has been impacted by the COVID-19 pandemic, leading SREDA to reduce its Q1 economic rating for the Saskatoon Region to a C+.

Saskatoon Region

According to the Conference Board of Canada, the Saskatoon Region economy is expected to contract by 1.6% for Q1 2020, followed by a deeper contraction of 6.7% for Q2 2020. Later in the year, growth is expected to rebound by 2.2% and 1.7% for Q3 and Q4 2020, respectively. Annual growth forecasts average to a contraction of 4.9% for 2020, followed by a rebound of 5.2% in 2021.

Table: Economic Growth Forecast for Saskatoon CMA

Q1 2020Q2 2020Q3 2020Q4 2020Q1 2021Q2 2021Q3 2021Q4 2021
Quarterly GDP (%)-1.6-6.72.21.72.22.01.40.6

Table: Economic Growth Forecast for Saskatoon CMA

201920202021
Annual GDP (%)-1.2-4.95.2

Labour Force
So far, the unemployment rate in the Saskatoon Region has only risen by 0.7% to 6.4% for the first quarter of 2020. Worse is expected for Q2. The Conference Board of Canada forecasts that the unemployment rate will reach 14.4%, followed by a recovery to 6.8% in both Q3 and Q4 2020.

Saskatchewan

What we have achieved so far in Saskatchewan’s fight against COVID-19 is positive: generally low case numbers, relatively slow spread of the virus and good compliance with public health orders. Saskatchewan is lucky to have avoided some of the damage that other areas have seen. We are lucky to live in a province with the wide open spaces that give us room to practice physical distancing effectively. We are lucky to have a strong community full of amazing individuals and businesses eager to rebuild. How we approach that process is crucial.

Economic forecasts by six major Canadian financial institutions show an estimated average contraction of 6.0% for Saskatchewan in 2020, followed by a rebound of 4.5% in 2021.

Table: Economic Growth Forecast for Saskatchewan

Financial Institutions20182019f2020f2021f
RBC1.30.6-5.22
TD1.30.6-4.83.7
BMO1.30.9-6.55.3
CIBC1.30.5-3.94.7
Scotiabank1.31.0-9.46.5
National Bank of Canada1.30.7-5.95.0
Average Economic Growth1.30.7-6.04.5

Table: Key Indicators of the Saskatchewan Economy

Indicators20182019f2020f2021f
Real GDP (y/y % change)1.30.7-6.04.5
Nominal GDP (y/y % change)1.42.2-8.98.6
Employment (y/y % change)0.41.7-6.44.2
Unemployment (%)6.15.49.77.9
Housing Starts (x 000s)3.62.42.43.9
Retail Sales (y/y % change)-0.3-0.20.81.5
CPI (y/y % change)2.31.71.22.1

Commodities
Falling oil prices are weighing on an already-challenging environment in the province as the pandemic affects the economy. Oil prices are not expected to recover until the second half of the year, when they are forecast to reach $40 USD.

The potash sector is also experiencing challenges. Slowing global demand, rail strikes and temporary bans on imports in China led to lower fertilizer prices and temporary closures late last year. While production is expected to recover in the year ahead, a weak start and pandemic-related disruptions to global trade will dampen performance.

Prospects for the uranium industry are modest with suspended output at the McArthur River mine and the recently announced shutdown of the Cigar Lake mine. As the economy slowly opens back up, rising uranium prices are expected to benefit the industry – prices have reached a 4-year high.

The Road Ahead

The rebounding growth predicted in these forecasts for late 2020 and into 2021 depends on our caution, unity and dedication. Now, more than ever, businesses need to think creatively to adapt to the social distancing economy. As Saskatchewan proceeds carefully through the re-opening phases, retooling to suit the changed needs of a new normal is crucial. We are still in a provincial state of emergency and will be for some time. Learning from the best practices of essential businesses such as grocery stores and pharmacies will play a key role in ensuring we can recover from this shock. Even once the virus has receded, inventive, collaborative leadership will be necessary in making the most of how we rebuild—as businesses, as communities, and as a province.

Sources
https://www.conferenceboard.ca/docs/default-source/provincial/24536_summexec-provincial-outlook-spring-2020.pdf?sfvrsn=83515413_2
https://www.conferenceboard.ca/focus-areas/canadian-economics/provincial-outlook/saskatchewan
https://www.desjardins.com/ressources/pdf/peft2004-e.pdf?resVer=1586352312000
https://www.nbc.ca/content/dam/bnc/en/rates-and-analysis/economic-analysis/monthly-economic-monitor.pdf
https://www.bdc.ca/en/blog/pages/2020-economic-outlook-canada.aspx
https://economics.cibccm.com/economicsweb/cds?ID=10569&TYPE=EC_PDF
https://economics.td.com/provincial-economic-forecast
https://thoughtleadership.rbc.com/a-downturn-like-no-other/?utm_medium=referral&utm_source=economics&utm_campaign=macro+april
https://royal-bank-of-canada-2124.docs.contently.com/v/covid-19-recession-deepens-fast-from-coast-to-coast-report
https://www.conferenceboard.ca/temp/55120e1d-6b3c-46bc-8778-6c795ad87490/10648_ES_CO_EN_Spring2020.pdf

Forecast Sources
http://www.rbc.com/economics/economic-reports/pdf/provincial-forecasts/provtbl.pdf
https://economics.td.com/provincial-economic-forecast
https://economics.td.com/pef-update
https://economics.cibccm.com/economicsweb/cds?ID=10569&TYPE=EC_PDF
https://www.nbc.ca/content/dam/bnc/en/rates-and-analysis/economic-analysis/monthly-economic-monitor.pdf
https://economics.bmo.com/media/filer_public/ee/47/ee47dd61-56eb-4fd0-b452-10c7619e4a4e/provincialoutlook.pdf


Catherine Hynes

Specialist, Communications
306-664-0724