TORONTO (miningweekly.com) – Strengthening mining output is expected to drive Saskatchewan's economy this year, with provincial real gross domestic product growth projected to reach 2.9% in 2013 and 3.7% in 2014, financial services provider RBC Economic Research's latest ‘Provincial Outlook’ has stated.

In 2012, RBC's forecast for provincial growth declined steadily to 2.4%, as demand for potash - and, in turn, potash production - softened mostly as a result of weak overseas demand. However, with multiyear sales agreements settled late last year and early this year with a number of critical international buyers, such as India and China, demand has started to pick up.

In fact, potash production numbers for the first quarter of 2013 were pointing to “an impressive” 26% increase year-on-year, RBC said.

Saskatchewan is the world's largest producer of the crop nutrient, and produced more than 85% of Canadian potash, with one additional potash mine in New Brunswick. The province's sgnificant potash producers included PotashCorp, The Mosaic Company and Agrium, which operate about ten mines.

"Saskatchewan's economy has traditionally been buffeted by swings in agricultural production, and in recent years the mining sector has been an additional source of volatility," RBC senior VP and chief economist Craig Wright said in a statement.

"We expect the potash rebound to boost mining output by 4.5% this year and 5% next year, after growth of only 1% in 2012," he said.

A substantial snowfall, last winter, sparked concerns that Saskatchewan's agricultural production would be hindered by potential spring flooding, RBC said. By the end of May, however, Saskatchewan's government reported that 67% of 2013 crops had been planted - this being only slightly below the five-year average of 70% for that time of year.

"We project a relatively stable 3% growth for Saskatchewan's agricultural sector both this year and next, assuming that normal growing conditions prevail in the fall," Wright added.

RBC expected residential construction to weaken from the overstated level of starts in 2012 - from 10 000 units last year to 7 900 this year and about 6 900 in 2014. This weakness, however, would be offset by strength in nonresidential construction, such as ongoing spending on the C$4.1-billion Legacy potash mine, being developed by K+S Potash Canada. RBC assumed net growth in construction spending this year would be relatively modest at 1.5%.