News

Why We Gave the Saskatoon Region Economy a C-…For Now

With Q2 2020 economic data at our fingertips, SREDA has downgraded our rating of the Saskatoon Region economy to a C-. Here are 6 reasons why:

1. Despite Progress, the Pandemic Remains

Although the Saskatchewan economy has reopened in recent weeks, significant uncertainty remains. Full economic recovery won’t be possible until people feel safe from COVID-19. Forecasts by five major Canadian financial institutions show an estimated average contraction of 6.7% for Saskatchewan in 2020, followed by a rebound of 5.0% in 2021.

Table: Consensus Economic Growth Forecast for Saskatchewan (%)

Financial Institutions20182019f2020f2021f
RBC1.3-0.8-6.23.8
TD1.3-0.8-6.24.7
BMO1.3-0.8-6.25.3
Scotiabank1.3-0.8-7.86.5
National Bank of Canada1.3-0.8-6.94.7
Average Economic Growth1.3-0.8-6.75.0

2. Unemployment Has Risen

Q2 saw job losses in the Saskatoon Region reach 19,000, while the unemployment rate rose to 12.1%. This reflects an expected contraction of 6.7% in Q2 for the Saskatoon Region economy, according to the Conference Board of Canada. Modest growth of 2.2% and 1.7% is projected for Q3 and Q4 2020. Provincially, unemployment has risen, though it has trended below the national average because of Saskatchewan’s relatively diversified economy.

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

3. Tourism Faces Tough Times

The tourism sector remains uncertain, with many countries restricting borders and people hesitant to travel because of the pandemic. Airlines have noted a gradual increase in passenger traffic from its low during widespread lockdowns, indicating slowly returning confidence. Full recovery, however, is expected to take years.

4. Energy Ekes Out Modest Improvements

The oil price shock earlier in the year combined with the coronavirus pandemic to challenge the energy sector. Although oil prices have stabilized, the sector faces a slow recovery, with Saskatchewan faring somewhat better than its oil-producing counterparts.

5. Natural Resource Sector Shows Some Resilience

Agricultural exports and potash have seen limited effects from the pandemic so far. According to TD Economics, Saskatchewan’s agriculture sector is expected to remain solid as activity contracts globally. Agriculture’s strength is projected to support exports and cushion other industries like oil and uranium production.

6. Infrastructure Spending on the Horizon

The Government of Saskatchewan recently released its 2020 budget, highlighting a $2 billion increase to the provincial capital spending plan in response to the pandemic. This should provide a significant boost to non-residential construction investment as the province looks to rebuild.

Table: Key Indicators of the Saskatchewan Economy

Indicators20182019f2020f2021f
Real GDP (y/y % change)1.3-0.8-6.75.0
Nominal GDP (y/y % change)1.40.5-9.38.4
Employment (y/y % change)0.41.7-5.64.2
Unemployment (%)6.15.49.47.8
Housing Starts (x 000s)3.62.42.32.9
Retail Sales (y/y % change)-0.3-0.5-4.10.4
CPI (y/y % change)2.31.70.61.5

SREDA is committed to providing timely, balanced and digestible information about the performance of the local economy. If you have questions or feedback, contact us at info@sreda.com.

Sources

https://royal-bank-of-canada-2124.docs.contently.com/v/reopening-of-provincial-economies-different-speed-scale-and-outcomes-report

https://economics.td.com/provincial-economic-forecast

https://www.scotiabank.com/content/dam/scotiabank/sub-brands/scotiabank-economics/english/documents/forecast-tables/forecast_20200605.pdf

https://economics.bmo.com/media/filer_public/a5/4a/a54a50e6-2208-43a2-a9bd-2d644c58cd70/provincialoutlook.pdf

https://economics.bmo.com/en/publications/detail/7828c198-7ebe-4f74-8696-1c5e6cc919f1/

https://www.nbc.ca/content/dam/bnc/en/rates-and-analysis/economic-analysis/monthly-economic-monitor.pdf


Tyler Nguyen

Specialist, Economic Intelligence
(306) 664-0724