TD Economics has reduced its outlook for Saskatchewan's economic growth this year, based on the heavy rainfall on the Prairies in late June.

The bank's economists predicted Monday the province's growth for the year will be 2.1 per cent, when inflation is taken into account. That's a cut of 1.1 percentage points from TD's previous estimate, and "the negative impact on GDP growth in the province could be as large as two percentage points," the report said.

Roughly a fifth of total acreage in the Prairies — as much as five million hectares — is likely to remain unseeded this year. (CBC)

The bank didn't change its forecast for Alberta and Manitoba, where agriculture accounts for less of the economy than farming's nine per cent share in Saskatchewan.

"Severe flooding in the Prairies in late June has had a significant impact on the agriculture sector, particularly in Saskatchewan," the report said.

"Roughly 20 per cent of total acreage in the Prairies has yet to be seeded, and with the seeding deadlines having passed, these areas — estimated to be as large as five million hectares — are likely to remain unseeded this year."

Rainfall in late June was about 70 per cent more than average. Hardest hit were central and northeast Saskatchewan, but parts of southern Alberta and Manitoba were also drenched.

The bank estimates the rain affected one-fifth of Saskatchewan's population, 10 per cent of Alberta's and five per cent of Manitoba's.

It said crop insurance and government aid will mitigate the effects in Saskatchewan, but will not fully offset lost output.

And while farm product prices are up since the flooding began, TD cautioned that global storage levels of most crops are still quite high after two years of bumper harvests, and any further price increase will likely be limited.

The bank increased its prediction for Saskatchewan's growth next year, assuming a bounce back as normal growing conditions return. It predicted inflation-adjusted growth of 3.8 per cent, an increase of 0.5 percentage point from its previous forecast for 2011.

The floods damaged homes, roads, railways and bridges and closed a portion of the Trans-Canada Highway between Medicine Hat, Alta., and Maple Creek, Sask.

$300M damage

The TD report estimates the damage total to houses, businesses and infrastructure at $300 million, and it notes that outside of agriculture, some sectors of the economy will actually see output increase as a result of the rainfall.

"While obviously devastating, all the homes, buildings and infrastructure that were destroyed in the flood will have to be repaired or replaced, as well as any furnishings and appliances inside the homes and buildings that were ruined. Already, repairs have begun on the Trans-Canada Highway, and there are still plenty of other roads and bridges that will need to be fixed."

As a result, "construction activity, as well as the retail sales industry (durable goods in particular), is likely to pick up in the regions that were hit by the flood."