Thank you, Mr. Chairman. It's a pleasure to be here today.
Good afternoon. My name is Doug Zolinsky. I am the acting assistant deputy minister for Western Economic Diversification's regional office in Saskatchewan. My colleague James Meddings is our ADM of policy and strategic direction. Rhonda Laing is our director for policy, planning and external relations for the Saskatchewan region.
I will speak to the economic conditions in Saskatchewan, but I should first note that Western Economic Diversification Canada, or WED, has a strong presence in Saskatchewan and close ties with provincial counterparts, Saskatchewan's business community, indigenous organizations, and other stakeholders. This supports the department's role in providing regional intelligence and strategic advice, convening regional stakeholders, and supporting regionally sensitive economic development.
Let me tell you a bit about Saskatchewan. Saskatchewan has a total population of 1.14 million. The population is young, and it has been growing since 2007, reversing a decade-long decline and breaking away from relatively flat population growth since the 1930s. Saskatchewan has a large indigenous community. As of the last census count in 2011, 15.6% of Saskatchewan's population was indigenous, and first nations children aged 14 and under represent one-fifth of all children in the province.
Saskatchewan has a diverse range of natural resource endowments, including oil and gas, potash, and uranium, and Saskatchewan is also Canada's largest agrifood producer. Natural resources are key economic drivers. The province's largest industry is the oil and gas sector, which accounts for roughly 15% of Saskatchewan's GDP. Collectively, primary resource production accounts for roughly 27% of the province's real GDP, which totalled $58.5 billion in 2015.
Saskatchewan has undergone significant changes in the past decade. Until recently, Saskatchewan was enjoying particularly strong economic growth due to a commodity boom starting around 2002. This was related to rapid industrialization in China and other developing countries, which increased demand for raw materials and Saskatchewan's resources. A number of factors, including slowing growth in China and other emerging economies and strong global supply, have since put downward pressure on the price of a number of key commodities for Saskatchewan, including oil and potash.
Lower commodity prices pose a real challenge for Saskatchewan. In 2015 Saskatchewan's real GDP declined by 1.4%, largely as a result of low oil prices. From 2014 to 2015, capital expenditures fell 17.3%, with the largest decreases occurring in the mining and oil and gas sectors. Compared to two years ago, there are fewer than half as many drilling rigs active in the province, with 27 now compared to 68 in 2014, and strong supply has resulted in hundreds of layoffs in the mining sector, where prices are down from pre-recession highs.
Saskatchewan's unemployment rate is currently 6.3%, compared to 7% for Canada as a whole. While Saskatchewan's unemployment rate remains relatively low, it has increased substantially over the course of 2015 and 2016 from just 3.8% in 2014, largely as a result of low crude oil prices. As of August, there were 42,000 unemployed individuals in the province, compared to 31,000 at the same time two years ago.
Due to continued low oil prices, growth is expected to be constrained in 2016. However, Saskatchewan's diverse resource portfolio has helped to limit somewhat the impact of oil prices on the province's economy, and Saskatchewan is expected to experience the shortest and least severe recession among the oil-producing provinces.
Saskatchewan is heavily reliant on exports, and access to markets is critical to Saskatchewan's well-being. In 2015 Saskatchewan's merchandise exports totalled $32.6 billion. On a per capita basis, Saskatchewan has the highest exports among all the provinces, with nearly $29,000 in exports for every Saskatchewan resident in 2015.
The United States accounts for the majority of Saskatchewan's merchandise exports, but exports to developing markets, including China and India, are growing in importance. Between 2005 and 2015, China's and India's share of Saskatchewan's exports more than doubled. Collectively, these two countries received 16% of Saskatchewan's exported goods in 2015.
Reflecting the importance of natural resources, Saskatchewan's exports are dominated by commodities. The province's top export products are: crude petroleum oils, potash, canola seeds, lentils, wheat, peas, and uranium. Together, these accounted for roughly three-quarters of total merchandise exports in 2015.
Saskatchewan's exports have been supported by advancements in Saskatchewan's traditional sectors, such as the adoption of advanced farming techniques and the development of new crop varieties. For example, Saskatchewan is now a key producer of pulse crops, which have become important exports and cash crops. In 2015 lentils and dry peas accounted for 23.9% of all crop cash receipts in the province.
Saskatchewan is also a leader in innovative sectors related to its traditional resource strengths. The province is home to a vibrant agriculture biotechnology cluster with expertise in crop development, vaccines, and the development of new bioproducts. This cluster helps to position Saskatchewan producers to address growing global demand for food and other products such as bioenergy. Saskatchewan also boasts a highly innovative energy cluster and is a leader in enhanced oil recovery and carbon capture and storage, helping to increase production and lower costs for producers.
In the agricultural sector, Saskatchewan has translated its traditional strengths and expertise into value-added manufacturing, including food processing and agricultural equipment manufacturing. Saskatchewan is also establishing leadership in other emerging sectors such as nuclear science, creating conditions for the province to capture more of the uranium value chain and to capitalize on opportunities related to medicine and power generation.
Saskatchewan faces a number of economic challenges.
Saskatchewan's economic reliance on natural resource development exposes the province to economic downturns and commodity price volatility, or boom and bust cycles. Saskatchewan exporters are highly dependent on the U.S. market despite growth in developing markets. Saskatchewan innovators face challenges in accessing the capital they need to get their ideas to market, and Saskatchewan has low levels of research and development compared to competing jurisdictions.
Saskatchewan's indigenous population is highly entrepreneurial. Private investment in indigenous economic growth in Saskatchewan is increasing. However, there are significant socio-economic gaps between Saskatchewan's indigenous and non-indigenous residents. Closing these gaps is critical, both to the well-being of Saskatchewan's indigenous residents and to the province's overall future economic prosperity.
WED's programs and activities are well aligned with challenges and opportunities facing Saskatchewan. Through the western diversification program and the western innovation initiative, WED makes strategic investments to grow and diversify Saskatchewan's economy. Through its support for the Western Canada Business Service Network, WED also provides access to services and capital, which helps small and medium-sized enterprises to innovate, grow, and create jobs.
It is important that Saskatchewan's firms are able to compete internationally and that they continue to increase their penetration of global markets. Through its investments, WED helps western Canadian small and medium-sized enterprises build their capacity to engage in international business opportunities and in emerging markets. WED also raises awareness of Saskatchewan and western Canada's key strengths and sectors in international markets to promote trade and attract foreign investment to the region.
Improving access to capital and increasing investment in research and development can help to support innovation and increase value-added production in the province. WED's investments support the development and commercialization of key innovative products and processes, and the department has helped to grow key emerging sectors in Saskatchewan, including biotechnology and value-added food processing.
Improving economic outcomes for Saskatchewan's indigenous population can help to improve economic output and provide broader community and societal benefits in the province. WED's support for indigenous skills and training and economic growth can help to increase indigenous labour market participation and improve living standards in Saskatchewan.
We are proud of our role in Saskatchewan and will continue to work with key partners in the province to help Saskatchewan seize economic opportunities and increase prosperity in the province.
Thank you.