2003 weighed petroleum against agriculture in a year of mixed results.

Neither the best nor the worst of times. As 2003 came to a close, analysts were still weighing their impressions of the year in a bid to deter mine if it was better than average or a time when our economy under per formed but a few basic facts are clear.

From an economic growth perspective 2003 delivered a marked rebound from 2002 which, depending on whose numbers are used, was either a year of contraction or negligible growth. As the new year arrived, the prospects for 2003 were so strong that the provincial government projected growth would reach 6.8 per cent when it delivered its spring budget.

By year's end no forecasters were suggesting the 6.8 per cent level had been achieved but, after 2002's weakness, largely the result of drought, 2003 represented a marked improvement with most private analysts saying economic growth would likely come in around three or four per cent.

The reasoning behind the forecast for above average growth in 2003 was to be round in the 2002 drought. But this year farming took another hit. Grain production improved in 2003 but poor moisture conditions in many regions resulted in a below-average crop once more. Then came the fateful day in May and confirmation of BSE in an Alberta cow.

An immediate border closure produced a glut of sharply devalued beef in Canada, resulting in every aspect of the meat industry finding itself in crisis. Even non-beef producers felt the impact as consumers rallied behind the beef industry at the expense of pork suppliers.

At the time the province was predicting a 6.8 per cent growth spurt, says Industry and Resources minister Eric Cline, "we were planning for an average crop, not BSE and West Nile. Given the BSE, West Nile, softwood and drought, we've come out of the year not too badly."

Cline points to growth in the resource sector as the offset for the persistent difficulties in agriculture. Oil and gas exploration was up by 25 per cent in the year. Mining exploration was also up 25 per cent. Strength in the retail, wholesale and housing sectors also helped.

"We had better job numbers. When you're losing agriculture jobs, overall it's hot bad," Cline added.

Retail sales figures, for example, at the end of the third quarter of 2003 were up eight per cent over the same period a year earlier. According to the monthly statistical publication Sask Trends Monitor, the figures were record-setting and marked the 32nd consecutive month of increases on the retail sales front, a potent sign of consumer confidence levels. That confidence was also evident in housing and construction numbers, which were well ahead of last year, particularly residential development as building permits and home values rose throughout the year.

All of this, says Cline, sets the stage for continued growth in 2004.

"We have a more competitive income tax regime, oil royalty regime, mining and forestry," Cline offers. "I'm a believer that if you focus on areas where you have advantages and build them, other things will follow."

The 'focus' Cline talks about is clearly evident in government decisions regarding resource royalties.

After discussions with oil and gas players, the provincial government restructured its royalty regime to address industry concerns. The industry responded quickly to the changes that put Saskatchewan on a competitive footing with Alberta, putting more money into land sales and drilling activity, especially in the area of the recent Shackleton natural gas discovery in western Saskatchewan.

Cline, whose department is responsible for the energy and mines areas as well as economic development, notes that a similar strategy was undertaken in the mining sector. Dialogue with industry led to changes in government policy.

"In oil and gas you saw an immediate upswing," the minister explains. "Mining is more long-term thinking. They take a very long rime before they invest in a big mine."

Significant exploration and development are required before reaching a decision to establish a mine so, he adds, the key indicators to watch are round in exploration levels, which have gone up sharply since the policy changes. Further, the minister suggests this is an industry to watch over the longer term.

In oil and gas, he offers, Saskatchewan is a smaller player than Alberta but mining is a different story. With world-class uranium and potash mines we already stand among the national leaders and he suspects we could experience the same achievements in other areas, notably gold and base metals and, perhaps, diamonds.

The big picture, Cline notes, includes a return to basics. Several years ago capital was chasing information technology plays where potential was more important than cash flow. After the tech bubble burst, he adds, old-fashioned things with value--things like resources--are back in fashion, putting Saskatchewan in a favorable position for future development and growth.

Although 2003 was far from the best year on record, it was far from the worst. Growth of three to four per cent is comparatively strong, especially in light of the challenges in all areas of agriculture. Had the livestock sector not suffered the upheaval of BSE and grain production returned to average levels, the prospect of 6.8 per cent growth may not have been far off the mark. Even so, the importance of agriculture in the economy is clearly falling as the nature of Saskatchewan's economy changes now that the resource and the financial sectors outpace agriculture in size and impact.

CONTACT

Hon. Eric Cline

Minister of Saskatchewan Industry and Resources

[phone]