Will Saskatchewan Fall into Recession?

Will Saskatchewan experience a recession because of falling oil prices?

The Conference Board of Canada predicts this drop will cause Alberta to slip into a recession by the end of the year. Jeff Rubin, the author of “The End of Growth” and former chief economist of CIBC World Markets believes the dip in the sector could affect Saskatchewan as well, though not as seriously.

“I don’t expect Saskatchewan or Newfoundland to be as adversely affected as Alberta,” Rubin said.

“But it’s going to impact the economy, it’s going to impact tax revenues. Governments are going to be challenged in the sense that if they don’t challenge spending, they’ll see their deficits go off side.”

It could also affect property prices.

The Conference Board of Canada predicts that Alberta will slip into a recession before the end of the year. Rubin echoes that warning. He said Alberta could experience its worst recession since the late 1980s.

At the end of the day, Saskatchewan will be okay because we have what the world needs.  It may not be as great as it was in 2009 but we will be okay.  That being said, we are so reliant on commodity prices that these kind of dips are going to impact us forever with no way out.  In that way the new Saskatchewan under Brad Wall isn’t a lot different than the old Saskatchewan under Grant Devine or Roy Romanow.  Like the rest of the world, the global economy will always have a big impact on us for good or for bad.

Cam Broten has said before that he wants more eggs in more baskets.  I think we all do in Saskatchewan but man is it hard to do.  I posted before about Alberta’s struggles in diversifying their economy and the same thing has happened here.  I agree with diversification but we are a province of a million people and there are going to be times that the world economy conspires against us and makes it really hard.  This is one of those times.

Alberta has already tried to diversify it’s economy. It failed

From the Calgary Herald

As for policy, the Alberta government tried to diversify the Alberta economy in a deliberate fashion back in the 1980s and early 1990s.

Starting under then Premier Peter Lougheed and also under his successor, Don Getty, the provincial government provided loans, loan guarantees and equity stakes to companies in the non-energy sector.

In one example, the provincial government backed “made in Alberta” banks, trust companies and investment firms. After the early 1980s recession and then a mid-decade collapse in oil prices (to $10.25 a barrel in April 1986, down from $26 in December 1985), Alberta’s real estate values also plummeted. That took down many of those same provincially guaranteed financial institutions, themselves heavily invested in real estate.

The price tag to the provincial government for that diversification effort was $1.8 billion, for everything from failed loan guarantees to partially covered consumer and investor deposits.
In another diversification attempt, the province also loaned, guaranteed and took equity partnerships in everything from a forestry company to a meat packing plant, a provincial bitumen upgrader, a waste treatment plant and a high-tech company. By the early 1990s, defaults and foregone capital investments from all of the above cost the province $2.2 billion — in addition to the $1.8-billion financial sector collapse.

These efforts didn’t help Albertans adjust to a new reality or diversify the economy. It was simply activist industrial policy, where governments pick winners and losers. The latter cropped up more regularly than the former.

Top 10 Photos of 2014: #1 – Atlas Coal Mine Wooden Truss Bridge

Atlas Coal Mine Wooden Truss Bridge

This is the photo that Flickr thought was my most interesting photo of 2014.  

The wooden C.P.R. ”Howe Truss” bridge over the Red Deer River at East Coulee was built in 1936 and destroyed by heavy flooding and ice flows in April 1948. It was rebuilt soon thereafter. It was already an old-fashioned design when it was built, as wooden Howe Truss bridges were primarily used in the 19th century.

By 2014 it had several rotten beams and locals had placed down timber and plywood to help one get across.  If that wasn’t scary enough, there are rattlesnakes that are living in the soft timber and dirt on the bridge.  Of course I walked across it and about half way across the Red Deer River, I realized how stupid of decision it was.

That being said, I love that the Alberta government has left it up.  What a great reminder of the regions past and a great addition to the Atlas Coal Mine site.