Another major bank is forecasting Saskatchewan to lead the country in economic growth in 2009, with a projected one per cent increase in real gross domestic product.

“Saskatchewan’s economy continues to forge ahead despite a pronounced slowdown across the country,” said the BMO forecast released Wednesday. “A diverse commodity mix, fiscal stimulus and renewed population growth likely kept real GDP growth at a healthy three per cent in 2008, before cooling to one per cent this year — still the strongest in Canada.”

While the commodity boom has fizzled in recent months, Saskatchewan’s diversified resource mix is helping to buffer the downturn, said BMO economist Robert Kavcic.

“Crop output had a solid year in 2008, while exploration and drilling activity in the province continue to benefit from a relative cost advantage over neighbouring Alberta.”

Saskatchewan’s hottest growing commodity is people, with the province netting more than 6,000 interprovincial migrants in the latest four quarters and population growth above two per cent year over year for the first time since the 1970s. This has helped boost retail sales by a nation-leading 13 per cent year over year through October, with even bigger increases in the wholesale sector, the report said.

However, the province’s housing market has cooled quickly, with sales down about 30 per cent year over year and prices up 13 per cent year over year in the latest month — a far cry from the near 50 per cent year-over-year gains earlier in 2008.

The provincial government has maintained its solid financial position for the current fiscal year, despite falling commodity prices and recent tax cuts, the report said.

Revenue is expected to be $12.3 billion in fiscal 2008-09, down $203 million, or 1.6 per cent, from the first-quarter forecast, reflecting $334 million in income tax cuts announced in October and an $88-million decline in non-renewable resource revenues.

Program spending is pegged at $9.1 billion, leaving the pre-transfer surplus at $2.6 billion, or $2.3 billion after a transfer to the Growth and Financial Security Fund — the province’s rainy day fund. That’s the largest bottom line on record, the report said.

“In response to economic headwinds, the province is putting some of its fiscal muscle to work,” the report said, referring to the October announcement of a 50 per cent increase in infrastructure spending to $1.5 billion and income tax cuts, including a $4,000 increase in the basic personal exemption and a $2,000 increase in child tax credit.

In December, RBC Financial Group said Saskatchewan would lead all provinces with 2.8 per cent economic growth in 2009. But later in the month, TD Economics forecast Sask-atchewan’s economy to grow by 0.6 per cent this year, the only province expected to post positive growth this year. TD predicts Canada will see a 1.4 per cent contraction in 2009.

Saskatchewan News Network; Regina Leader-Post

Report – from Moishe Alexander, CFC CEO