Saskatchewan Assessment Appraisers’ Association
September 24, 2015
Outline
• World economy• Competitiveness policies• Current projects
3% Global GDP Growth in 2015
6.8%2.5%
GDP Growth Forecast
Global Economic Forecast (Real GDP Growth)
Region 2014 2015F 2016F
World 3.3% 3.0% 3.4%
Canada 2.4% 1.0% 1.7%
US 2.4% 2.5% 2.6%
Saskatchewan 1.4% 0.1% 1.2%
Euro Zone 0.09% 1.3% 1.6%
China 7.4% 6.8% 6.4%
Source: Scotiabank
Commodities OutlookCommodities Forecast
Current price 2015F 2016F
Commodity ScotiaBank TD BMO ScotiaBank TD BMO
Oil -WTI- (US$/bbl) $ 99.00 $ 48.00 $ 49.40 $ 55.00 $50-55 $ 54.75 $ 65.00
Natural Gas (US$/mmbtu) $ 4.28 $ 2.82 $ 2.94 $ 3.00 $ 2.80 $ 3.11 $ 3.65
Lumber (US$/mfbm) $ 349.00 $ 390.00 $ 332.02 $ 320.00 $ 340.00 $ 360.00 $ 390.00
Wheat (US/Bushel) $ 5.12 - $ 6.89 $ 5.40 - $ 6.79 $ 6.45
Sources: ScotiaBank, TD & BMO
Canadian Outlook
• Non-energy exports performing well• Recovery in firm creation• Slow growth• Full capacity by the end of 2016
China’s economic effect
• In June and July China’s stock market dropped over 30% signaling weaker growth
• China accounts for one third of the world growth since 2008 (US accounts for 20%)
• Debt to boost growth– Debt as a share of GDP increased from 150% in 2008 to 250% in 2015. – Most of the debt is owned by Chinese nationals.
• Source: The Conference Board of Canada
China’s Implications for Saskatchewan
• Effect is expected to be limited as China’s Central Bank has $4 trillion in foreign exchange reserves as a cushion and multiple other action tools
• Slower growth in China could impact Saskatchewan as the
country is a large mineral and agricultural products buyer – (8% of Sask. total exports are directed to China)
Sources: The Conference Board of Canada & Statistics Canada, Industry Canada, Trade Data Online
Euro Sovereign Default
• 2009 Financial crisis produced a prolonged recession with large declines in income and employment which implies lower tax revenues.– Governments increase spending to stimulate the economy which
increases debt (and interest payments)
2008 2009 2010 2011 2012 2013 2014 2015-16%
-14%
-12%
-10%
-8%
-6%
-4%
-2%
0%
2%
Deficit as a percentage of GDP
Canada Greece
Source: Economics: Key Tables from OECD
Greek Sovereign Default
• Fiscal reforms included lower government spending, decreasing public employment, pension reforms and tax raises which tend to face resistance.
• Restructuring debts for longer maturity and lower interest rates.
• Defaults are more common than expected.
Euro Implications for Saskatchewan
• Increased uncertainty in financial markets which can be translated into the euro depreciation and potentially a short-term depreciation of other currencies such as the CAD
• Greece represents .025% of Saskatchewan total exports while the European Union represents 3.5%
• Depreciation of the EURO benefits Saskatchewan as it decreases the costs of imports from the region
Sources: The Conference Board of Canada & Statistics Canada, Industry Canada, Trade Data Online
Federal Reserve• Uncertainty about the timing of US Federal Reserve interest
rate hike
• Higher interests rates = borrowing more expensive
• Low interest rates promote spending and economic growth. However, extended periods of low rates cause inflation, low savings and risk seeking behaviors.
2014 GDP Comparison SK vs AB
Source: Statistics Canada, CANSIM Tables 379-0030
Diversification
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 20140.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
35.0%
40.0%
SK vs AB - Oil and Gas as % of GDP 1997-2014
SaskatchewanSK 5 Year Moving AverageAlbertaAB 5 Year Moving Average
POLICIES, PROGRAMS & SERVICE ENHANCEMENTS
Policy Impacts
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014$90,000
$95,000
$100,000
$105,000
$110,000
$115,000
$120,000
Productivity per Employee in Saskatchewan 2004-2014
Policy Target 3.5% GDP growth ActualReal
Val
ue o
f out
put
per
empl
oyee
(GD
P/em
ploy
men
t)
Source: Statistics Canada, Labor Force Survey & CANSIM Table 379-0030
Potash Production Incentives• 10-year holiday from base payments• 120% depreciation rate• $100K allowance per corporate office job
Uranium Royalties
• Royalties adjusted in consultation with industry
Mineral Administration Registry Saskatchewan
• MARS allows online dispositions• Industry saves millions in staking costs
Mineral Exploration
$0
$100
$200
$300
$400
$500
Other Uranium
2003 - 2014: Total = $2.97 B*; Uranium= $1.35 B*2008: $474 M; 2013: $236 M; 2014: $235 M**
*Data from the Annual Survey of Mineral Exploration Expenditures by the Saskatchewan Ministry of the Economy.
** Data for 2014 are a preliminary estimate.
Petroleum Production
• Saskatchewan Petroleum Research Incentive
• PST and fuel tax exemption on injection fluids
• PRIME• Oil and Gas Well Levy
Regulatory Improvements
• Results-Based Regulation• Regulatory Modernization
Property Tax SystemFour significant changes:1. Introduction of market
valuation2. Education Property Tax (EPT)
relief3. Harmonization of
percentage of value4. Limit on municipal mill rate
factors
TAXES
Source: Canada Revenue Agency and Provincial Finance Ministries
Source: Canada Revenue Agency and Provincial Finance Ministries
“Canada’s Most Damaging Tax”
Source: Canada Revenue Agency and Provincial Finance Ministries
Source: Canada Revenue Agency and Provincial Finance Ministries
Competitiveness• Saskatchewan ranked
2nd out of 122• Improved from 30th
out of 64 in 2004• 2013 Global Petroleum
Survey: best policies in Canada
• Infrastructure• Workforce• Competitiveness• Resources• Trade• Fiscal
responsibility
Ministry of Economy Targets (2020)
• 60,000 more people working• Double the value of exports• Increase timber harvesting by 50%• Increase mineral production by 50%• Increase oil production by 1%• Saskatchewan’s economy will remain among
the most competitive in Canada
Oil & Gas Upstream Investment ($B)20
00
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
*
2014
**
2015
f
2016
f
2017
f
2018
f
2019
f
$0.0
$1,000.0
$2,000.0
$3,000.0
$4,000.0
$5,000.0
$6,000.0
$7,000.0
Source: Canadian Association of Petroleum Producers(CAPP)
Mining Investment($B) 20
00
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
*
2014
**
2015
f
2016
f
2017
f
2018
f
2019
f
$0.0
$500.0
$1,000.0
$1,500.0
$2,000.0
$2,500.0
$3,000.0
$3,500.0
$4,000.0
$4,500.0
$5,000.0
Source: CANSIM 029-0005, Statistics Canada Forecast by Saskatchewan Ministry of Economy
Agriculture Investment ($B)20
00
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
*
2014
**
2015
f
2016
f
2017
f
2018
f
2019
f
$0.0
$200.0
$400.0
$600.0
$800.0
$1,000.0
$1,200.0
$1,400.0
$1,600.0
$1,800.0
$2,000.0
Source: CANSIM 029-0005, Statistics CanadaForecast by Saskatchewan Ministry of Economy
Construction and Housing Investment ($B)20
00
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
*
2014
**
2015
f
2016
f
2017
f
2018
f
2019
f
$-
$500.00
$1,000.00
$1,500.00
$2,000.00
$2,500.00
$3,000.00
$3,500.00
$4,000.00
$4,500.00
Source: CANSIM 029-0005, Statistics CanadaForecast by Saskatchewan Ministry of Economy
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
*
2014
**
2015
f
2016
f
2017
f
2018
f
2019
f
$0.0
$200.0
$400.0
$600.0
$800.0
$1,000.0
$1,200.0
$1,400.0
Source: CANSIM 029-0005, Statistics CanadaForecast by Saskatchewan Ministry of Economy
Manufacturing investment ($B)
Associated Gas
Canola Processing
Pea Processing
Oat Processing
Barley Processing
Flax Processing
Agricultural Equipment Manufacturing
Mineral Processing
Investment Attraction Results
Year LeadsQualified
Leads Projects Investments2014/15 617 122 53 12
• $496M total investment
• 2015/16 to-date: 6 investments for $38M
Questions?