Prairie Province Economies Remain Sound
Interview by Rachel Duran
Editor’s Note: For the latest information in regard to the forecast for the Canadian economy, visit www.conferenceboard.ca.
The Canadian provinces of Saskatchewan and Manitoba are forecasted to advance at a steady pace in 2012. Thanks to increases in population in both provinces, housing starts continue to rise. In Saskatchewan, even with cutbacks in the production of potash, which drove the province’s economy in 2011, the industry continues to make investments to support long-term opportunities.
In Manitoba, the agriculture sector is expected to rebound this year from a poor performance last year due to flooding that affected seeding efforts in the spring.
The Conference Board of Canada’s Marie-Christine Bernard fills us in on the economies of these two provinces, as well as provides an overview of Canada’s overall economic situation. One measure says exports will increase in the next two years.
Global Corporate Xpansion: How is the Canadian region known as the Prairie Provinces faring as we head into the summer months?
Marie-Christine Bernard: For the Prairie Provinces, Manitoba and Saskatchewan, the outlook for 2012 is for real GDP to increase by 2.9 percent for both. For 2013, the Saskatchewan economy will soar by 3.5 percent, while growth of 2.7 percent is expected in Manitoba.
Saskatchewan did quite well in 2011 and grew by 5 percent, which was the strongest performance in Canada. Much of the growth came from the mining industry, with a lot of potash production.
Growth will decelerate in 2012. Due to the global uncertainties, and because they want to be able to maintain potash prices, the major players that produce it in Saskatchewan and in the global market decided to cut back production estimates.
So we won’t see a big contribution from potash to Saskatchewan’s growth in 2012.
This doesn’t mean the province isn’t doing well. There is actually a lot of investment in the potash industry because of the long-term prospects for the commodity. So with the investment comes a lot of construction activity.
Also, for the last few years, Saskatchewan has had strong population growth, which will continue to fuel housing starts on the construction side.
GCX: Describe the challenges and opportunities found in Saskatchewan’s economy.
Bernard: The domestic economy is doing quite well and labor markets are tight. We are seeing strong wage growth and income gains. Consumer demand will support the economy in the next few years.
Saskatchewan is one of the few provinces that have been running a surplus. Even in the
2008 and 2009 recession they didn’t run a deficit. The province’s officials are forecasting another surplus.
The province’s fiscal policy is not going to be as restricted. Like other provinces they did run up infrastructure spending to help the economy. So there will be moderation and easing in terms of infrastructure spending. There will be some fiscal restraint but not to the same extent as other provinces that are tackling large deficits, such as Ontario and Québec.
GCX: Breakdown the economic situation in Manitoba.
Bernard: In Manitoba there are a number of factors as to why the economy will do well. First of all, there will be a big increase in the agriculture sector. The last two years the sector did not do well. Last spring there was heavy flooding that disturbed the seeding process so the crops were not that good in 2011. We forecast that there should be a rebound to a more normal crop in 2012.
There will also be strong growth in the mining sector. Manitoba produces several metals, as well as oil.
Other sectors are doing quite well; however, when we look to the manufacturing sector, we don’t see strong growth. Manitoba produces transit buses, where they export many to the United States to supply municipalities. And things are difficult on the fiscal side at the municipal levels. Although we won’t see strong growth in the manufacturing sector, it will continue to grow.
Looking at another sector, the outlook is quite favorable for the construction sector. For the last several years Manitoba’s population has been rising as they have seen an increase in immigration. The need for housing is growing so we will see an increase in housing starts.
Also in Manitoba, the service sector has performed well and that is expected to continue in 2012. There is also an active resale market so we should see strong growth in the real estate industry.
GCX: What are the challenges to Manitoba’s economy?
Bernard: Like many provinces, Manitoba has a large deficit to tackle so there will be some fiscal restraints. This includes a decline in infrastructure spending by all levels of government.
GCX: How do these two provinces play into Canada’s overall economic outlook?
Bernard: Growth will moderate to 2.3 percent in 2012, and improve in 2013 to 2.8 percent. There has been fiscal tightening at the federal level in Canada. The federal government wants to balance the books in the next two fiscal years. In the last federal budget it was announced the government wants to control more program spending. There will be more than 19,000 positions eliminated among public and civil servants.
Another measure will be to lower infrastructure spending that was boosted after the recession through the Economic Action Plan.
Employment gains were weaker earlier this year so consumers will be more conservative in terms of spending.
What we will see in the next two years is an improvement in the export sector due to the improvements in the U.S. economy. And Canada will continue to be a major producer of resources, which are still in high demand in emerging countries.
GCX: How will Europe’s economic challenges affect Canada?
Bernard: We don’t assume that it will derail the Canadian forecast that much. If there is a correction in global equity markets, it may affect Canada’s economic performance. But for now, in our scenario, we assume that the risks are contained. There are risks that we will revisit as 2012 unfolds, if there is a need.
Marie-Christine Bernard is the associate director, provincial forecast, for the Conference Board of Canada. She can be reached by e-mailing firstname.lastname@example.org. The Conference Board of Canada is the foremost independent, not-for-profit, applied research organization in Canada. The organization is objective and non-partisan, and does not lobby for specific interests. It is not a government department or agency, although it is hired to provide services for all levels of government. Visit the organization at www.conferenceboard.ca.