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January 12, 2011 09:46 ET

Flooding Dents Growth, but Saskatchewan Growth to Lead the Country in 2011, Says BMO Economics

REGINA, SASKATCHEWAN--(Marketwire - Jan. 12, 2011) - Saskatchewan is set to lead the country in growth for the coming year, according to the Provincial Monitor report released today by BMO Capital Markets Economics. 

"While Saskatchewan's economy underperformed in 2010, with 2 per cent real GDP growth expected as heavy flooding put a dent in crop production, the weak growth figure masks solid underlying economic prospects," according to Robert Kavcic, Economist, BMO Capital Markets. "Real GDP is expected to rebound 4.0 per cent in 2011, the fastest pace in Canada."

"Saskatchewan's increasing economic strength is great news," said Mike Darling, District Vice-President, Saskatchewan, BMO Bank of Montreal. "We look forward to supporting our businesses as they continue to grow and bring even more new residents to our growing province."

As a result of the wet weather, crop production is on pace for a 30 per cent decline 2010, which the Province's estimates will shave 3.3 percentage points from real GDP growth. Potash production, however, has bounced back sharply from depressed 2009 levels, and output in that sector is set to more than double, which will support growth. Ongoing expansion in the potash sector, along with investment activity in the energy space will drive growth in 2011.

"Since the Federal Government's rejection of BHP Billiton's bid for Potash Corp, investment announcements have continued—for example, Europe's K+S Group agreed to buy Potash One for $434 million, and will have access to its undeveloped deposit," said Mr. Kavcic.

Commodity-sector investment will also continue to drive job growth, and the province should again share one of Canada's lowest unemployment rates in 2011. Despite the recession and farm-sector woes this past summer, the labour market has posted a steady performance, with employment sitting near record levels in recent months. A tight labour market, solid job prospects and relatively low living costs should continue to drive population growth—net interprovincial migration to Saskatchewan held steady at more than 3,000 people in the four quarters through Q3 2010. That growth will support consumer spending and residential construction.

The Province of Saskatchewan is projecting an improved fiscal 2010/2011 fiscal position, as revenues are running ahead of expectations, and now expects a $137 million surplus before Growth and Financial Security Fund transfers, versus prior expectations of a $141 million deficit.

The complete report can be found at www.bmocm.com/economics.

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