The year of the pandemic will also be the year of deep recession.
Saskatchewan’s Real GDP is expected to drop close to six per cent this year as the “significant deterioration of the oil and gas sector” weighs heavily on the economy, according to Scotiabank’s latest economic outlook released Thursday.
The province’s GDP decline is in line with the national average.
Marc Desormeaux, a senior economist with Scotiabank, says Real GDP likely won’t return to pre-pandemic levels until 2022.
However, improvement in commodities outside of the oil and gas sector, such as potash, uranium and crop production, is showing promise for the province’s economy, he said.
“Perhaps most importantly, Saskatchewan still has a low COVID-19 case load relative to other provinces,” Desormeaux said.
“During the first wave, that allowed (Saskatchewan) to reopen earlier, return to growth earlier and to the extent it can continue to contain the virus’ spread, it may be in a position to do so again and see a relatively strong recovery going into next year.”
In what Desormeaux calls the “most significant global economic downturn since the Great Depression,” he says fiscal policy is necessary to drive economic recovery.
“Infrastructure spending at the provincial level is a good step. That’s something that can support the recovery. Spending on healthcare priorities is also important.”
The Saskatchewan Party and NDP have different plans to get the province back on track.
Scott Moe’s Sask. Party is committing $850 million in new spending on top of the $7.5 billion already promised for new builds over the next two years.
Currently facing a projected $2.1-billion deficit, Moe plans to balance the books by the 2024-25 fiscal year.
“There are going to be no mass cuts across government; there’s going to be no sales of the Crowns; there’s going to be no tax increases in the days ahead,” Moe told media after Wednesday night’s leaders’ debate.
According to NDP Leader Ryan Meili, his platform promises will cost around $2.7 billion. He says his plans for spending will lead to a quicker economic recovery.
“We will balance the budget as soon as we’re able, but we’re not going to do it in a way that’s going to hurt families and that’s the biggest difference,” Meili said.
But in unprecedented times, with the current economic outlook, economist Jason Childs says it’s hard to know which recovery approach is best.
Although, he says both parties are “optimistic” when it comes to revenue projections.
“I think both parties have exposed themselves to a lot of downside risk,” Childs said.
While Childs says there is more risk with the NDP’s spending plans, he doesn’t think the Sask Party will be able to balance the budget in its projected timeline “unless everything lines up exactly right.”
“If oil doesn’t recover, if we get a couple of bad harvests, if we get locked down again for an extended period of time, all of those things just make the revenue forecasts go away,” Childs said.
During the debate, Moe accused the NDP of leaving out an additional $4 billion attached to its spending plans.
Meili says Moe’s claim is a campaign tactic with no truth to it.
“Scott Moe is making up his own numbers. Those are not legitimate We’ve costed our platform and are fully confident in the numbers we’ve put forward,” Meili said.
While Childs says $4 billion might be an “extreme” claim, the economist did find missing numbers and inaccurate assumptions linked to the NDP’s costs, particularly when it comes to costs associated with the construction industry.
“It looks like (the NDP) is projecting the construction industry isn’t going to grow over the next four years. They’ve projected a flat cost for all four years and that just doesn’t match with the growing revenue they’re also using in their projections,” Childs said.
Childs adds that there are likely errors in the Sask. Party’s projected costs, as well.
Neither party is completely transparent in its projections, which makes it difficult to reach an exact cost, he said.