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Economy to bounce back: RBC

Province to lead country in growth during next two years

By Bruce Johnstone, Saskatchewan News Network; Regina Leader-PostDecember 15, 2009

The latest forecast from RBC Economics paints a positive picture for the immediate future of the economy in Saskatchewan.  The Star Phoenix reports:

After slipping to fifth place in 2009, Saskatchewan will bounce back to lead the nation in economic growth next year and the year after, the latest forecast from RBC Economics says.

"For 2010, we are expecting Saskatchewan's economy to grow by 3.9 per cent, followed by a strong 4.6 per cent rise in 2011," said the RBC report released Monday. "This will return the province to the top of the growth ranking among provinces after likely losing this honour to Manitoba in 2009."

RBC said the Saskatchewan economy shrank by 1.6 per cent in 2009, worse than the 1.3 per cent contraction the bank forecast in September. Like other forecasters, RBC is pointing the finger at potash as the main culprit for the economy's underperformance in 2009.

Also disappointing has been a similar drop in oil and gas drilling activity in the province through September, depressed by poor market conditions for natural gas due to weak demand, strong supply in the U.S., large inventories and low prices.

RBC also admitted to being overly optimistic about the impact of capital spending on the provincial economy in 2009. Earlier in the year, RBC expected business investment would help keep economic growth in positive territory in 2009, but sharper-than-expected deterioration in the prices of key commodities undermined this anticipated boost.

On the other hand, the 2009 harvest was better than expected earlier in the year, although not as good as last year's bumper crop, RBC said.

Fortunately for the province, many of the negative factors that contributed to the economy's contraction in 2009 should right themselves in 2010, the bank said. Although the global recovery is expected to be modest, it will be sufficient to boost both demand and prices for key commodities, such as potash and natural gas.

You can read the entire article here: http://www.thestarphoenix.com/business/Economy+bounce+back/2341293/story.html

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