With export trade representing about 70% of its gross domestic product, Saskatchewan is second only to Ontario as Canada’s most trade-dependent province.

And with more than 60% of exports going to the U.S., Canada’s closest ally is by far the biggest market for Saskatchewan’s exports, with China and Japan a distant second and third, respectively.

However, as important as the U.S. market is to Saskatchewan’s economy in general — and its exporters, in particular: “Saskatchewan exporters are the least reliant on the neighbouring U.S. market of any provincial economy in Canada,’’ maintains Dale Botting, former president and CEO of the Saskatchewan Trade and Export Partnership, a public/private-sector partnership formed 12 years ago to promote export trade.

The point is not to diminish the importance of the province’s trade relations with the U.S. but to suggest that even though a recession in the U.S. would be painful for most Saskatchewan exporters, it probably would not be fatal.

That’s certainly the view of University of Saskatchewan economics professor Eric Howe, who believes that a U.S. recession would disproportionately hurt Ontario and Quebec. In fact, Howe believes Central Canada’s misfortune could be Saskatchewan’s good fortune.

“If demand for labour goes down in Quebec and Ontario and we attract some of those labourers out here,” he says, “it will make our economy grow faster because we’ll have more people.”

Even if oil prices fall significantly below US$90 a barrel, Howe says, Saskatchewan will be OK. It was making “lots” of money at US$60 a barrel. “So, it’s not going to hurt us a lot,” he says. “The provincial economy is fine.’’

However, exporters such as Saskatoon-based Doepker Industries Ltd. — which manufactures trailers for agricultural, logging, gravel and industrial markets, mainly in the U.S. — don’t necessarily share Howe’s sanguine outlook.

Doepker CEO Gurcan Kocdag is watching events in the U.S. “very closely.” And, in addition to the falling greenback, Kocdag says, recent cuts in U.S. interest rates have given his U.S.-based competitors another advantage — lower borrowing costs.

Yet, provincial Finance Minister Rod Gantefoer isn’t too concerned that a recession in the U.S. will cool down Saskatchewan’s red-hot economy. He believes continued strong resources and agricultural commodity prices, combined with monetary policy easing by the U.S. and Canadian central banks, will keep the Saskatchewan economy on track for growth in 2008.

Gantefoer appears to be in good company, as most Canadian economists remain optimistic about the prospects for Saskatchewan’s economy this year.

A Conference Board of Can-ada forecast in late 2007 says Saskatchewan will see economic growth moderate to a more sustainable 2.8% in 2008, after posting 4.3% growth in 2007.

More recently, a Bank of Nova Scotia forecast estimates Saskatchewan’s GDP will grow by 3.1% in 2008 — second only to Alberta’s 3.4% and ahead of the rest of the provinces, including British Columbia, at 3%, and Manitoba, at 2.5%.

Scotiabank economists credit “robust mining activity, an inflow of new residents and solid income and wage growth’’ for the bullish forecast, noting that commodity prices are expected to remain at or near record levels in 2008.

TD Bank Financial Group upgraded its forecast in January for Saskatchewan’s GDP growth for 2008 to 3.4% from 3.2% in October, compared with the previous five-year average of 3.1% growth.

If anything, Royal Bank of Canada’s economists are even more bullish about the province, forecasting 3.8% growth in 2008 and 3.3% growth in 2009.

“Growth peaked at about 4.5% in 2007 and will soften in 2008-09, but the next decade offers great potential if the province plays its cards right and commodity prices co-operate,’’ says an RBC report, citing a “triple play’’ of the Bakken light oil play in the southeastern corner of the province, uranium development in northern Saskatchewan and potential diamond mining in the Prince Albert area, in the middle of the province.

The Bakken oil play is one of the hottest in North America. Estimates range from 100 billion to 400 billion barrels of light oil in place in the deep formation, which extends throughout the Williston Basin, which in turn lies beneath parts of Saskatchewan, Manitoba, North Dakota, South Dakota and Montana.

Saskatchewan’s share of that resource play could be anywhere from 25 billion to 100 billion barrels of oil, which, using conventional technology to recover 10%-15% of the oil in place, could yield 2.5 billion to 10 billion barrels of light sweet crude.

@page_break@Thanks in part to the Bakken play, Saskatchewan is expected to see a 6% increase in drilling activity to 3,600 wells this year, while Alberta is forecast to see a 31% drop in drilling activity, according to the Petroleum Services Association of Canada.

Saskatchewan’s 2007 oil and gas sales are estimated at $9.8 billion, up from $9.5 billion the previous year, according to Saskatchewan Energy and Resources. A total of 3,445 oil and gas wells were drilled in 2007.

On the downstream side of the oil industry, Consumers’ Co-operative Refineries Ltd. refinery in Regina recently announced a five-year, $1.9-billion expansion of its capacity to 130,000 barrels of oil a day from the current 100,000.

The project will generate between seven million and eight million person-years of employment, create 1,200 jobs during the peak construction phase and raise full-time employment at the refinery to slightly less than 700 when it’s completed in 2012 from the present 575.

But oil isn’t the only resource Saskatchewan has going for it. Potash production bounced back in 2007, after a blip in 2006 due to delays in potash sales to China.

Last year, Potash Corp. of Saskatchewan announced a four-year, $900-million expansion of its Cory mine, along with a $1.8-billion expansion of PCS Rocanville.

Saskatchewan is the world’s largest potash producer, with one-third of global production of the compound, used in the manufacture of fertilizers. The province is expected to increase its production by more than 25% with the completion of about $3.5 billion in expansion projects.

The province’s uranium production, which accounts for 30% of world supply, will also get a boost when Areva Resources Canada Inc.’s $400-million Midwest project in northern Saskatchewan begins construction in 2009. The project, which includes a $100-million upgrade of Areva’s McLean Lake mill, is expected to produce 16 million kilograms of uranium during its four-year lifespan.

The Midwest project will help make up for the delayed start-up of Cameco Corp.’s Cigar Lake mine, which suffered a major flood in 2006. Production from Cigar Lake, one of the world’s richest uranium ore bodies, is now set to begin in 2011 rather than 2008.

All told, Saskatchewan’s mineral and related resources sales, excluding petroleum, are expected to reach a record $4.6 billion in 2007, vs $3.2 billion in 2006.

On the renewable-energy side, the province’s electric utility, SaskPower, has the third-largest installed capacity of wind power in Canada at 172 megawatts, representing about 5% of its capacity. The Crown corporation plans on adding 100 megawatts of wind power by 2012. SaskPower is also planning to add another 100 megawatts of natural gas-fired power generation by 2010 at a cost of $150 million, part of a five-year, $525-million, 400-megawatt expansion of the province’s baseload power system.

Biofuels production will increase to about 300 million litres a year when Terra Grain Fuels’ $140-million, 150-million-litre-a-year ethanol plant at Belle Plaine begins production this spring.

And the completion of Whitemud Resources Inc.’s $50-million plant near Wood Mountain in southern Saskatchewan this spring will add a new industrial mineral to the province’s resources mix: meta-kaolin, which is superheated kaolin, or white clay, used in the cement industry.

Even the province’s perennially hard-pressed grain farmers have cause for optimism in 2008. Record prices for wheat, which have more than doubled in the past year, and for durum and other grains, as well as for oilseeds such as canola, have raised hopes for increased crop production and cash receipts surpassing last year’s disappointing crop.

However, livestock producers continue to suffer from low prices and rising input costs, with cattle producers reportedly losing $100 to $150 an animal and pork producers losing $55 an animal.

The province’s agriculture and food industry annually generates $5 billion-$6 billion in primary production, and an additional $2 billion-$3 billion in secondary and value-added processing, according to Saskatchewan Agriculture.

Thanks largely to the resources boom, capital spending in the province was an estimated $9.8 billion in 2007. Private and public spending has increased by an average of 7.8% annually over the past five years and is expected to increase by a healthy 5.8% in 2008, according to Statistics Canada.

All of this economic activity has resulted in record or near-record housing prices and sales, retail sales and consumer spending, and job and income growth.

Saskatchewan led the nation in income growth in 2007, posting a 6.9% increase to $740 a week — the largest increase of any province. Saskatchewan’s average employment income now ranks fourth in Canada, behind Alberta, Ontario and B.C. but ahead of Manitoba.

Job growth in Saskatchewan also set records in 2007. More people were employed in December — 499,100 — than in any other December in the province’s history. Average employment for 2007 was also the highest ever.

Not only were jobs plentiful and well-paying in 2007, they were high-quality jobs, according to a CIBC World Markets Inc. report. “Saskatchewan is again tops in overall job quality,” it says, thanks to high wages in energy extraction and mining, which are 50%-125% above the industry’s average.

The province’s consumers also led the nation in spending last year. From November 2006 to November 2007, retail sales increased by 17.1% to $1.1 billion and, for the first 11 months of 2007, retail sales increased by 12.6% to $11.7 billion — both percentage increase figures are tops in Canada.

And cross-border shopping, which was expected to increase with the recent parity between the Canadian and U.S. dollars, has not yet made an appreciable dent in retail sales.

Similarly, wholesale trade increased by 15.5% during the first 11 months of 2007 to $14.4 billion, the second-highest increase among the provinces.

Housing sales and prices smashed records in both Saskatoon and Regina, while housing prices increased by 30% across the province in 2007 — the highest increase in the country.

Not surprising, housing affordability has deteriorated to 40% of pre-tax income, which is at par with the Canadian average. However, housing prices in Saskatchewan are roughly $100,000 below the national average of $306,000, making the province a reasonably affordable place to buy a house.

Largely due to the increased cost of housing, the annual inflation rate in Saskatchewan increased by 2.9% in 2007 — the highest since 2001, when it increased by 3.1%.

Total housing starts reached 6,007 units in 2007, the highest level in 24 years, according to Canada Mortgage and Housing Corp.

However, escalating costs will push housing starts down to 5,600 units in 2008 and to 5,300 in 2009, while the average resale house price in Saskatchewan will rise by 26.4% in 2008 and by 8.2% in 2009, CMHC says.

Saskatchewan’s population grew by 0.7% in 2007, the biggest increase in two decades. Migration, especially from Alberta, helped push Saskatchewan’s population over the one-million mark for the first time since the 1980s. Population is expected to grow by another 0.5% in 2008, before levelling off to 0.4% growth in 2009-10 and 0.3% in 2011-12, according to the Conference Board of Canada.

“Last year was a good year for the Saskatchewan economy,’’ said provincial Enterprise and Innovation Minister Lyle Stewart in a recent statement. “And things will only get better in 2008.”

Many economists agree. IE