Alberta is in for a challenging economic year, according to the latest forecast from ATB Financial, but the institution says the province will likely avoid another recession.
The economic outlook anticipates GDP growth of 0.7 per cent this year and 1.6 per cent in 2020. Unemployment is forecast to tick up slightly from 6.6 per cent to 6.9 per cent this year and remain fairly consistent into 2021.
“Despite all the headwinds hampering Alberta’s economic progress, it looks like we will avoid slipping back into recession. With that said, we’ve cut our growth forecast in half from where it was in March,” said ATB’s chief economist Todd Hirsch in a news release.
“With real GDP growth of just 0.7 per cent, it is going to feel slow in our province.”
Continuing challenges in the oilpatch are a big factor in the sluggish outlook, with improved prices tempered by transportation constraints, low natural gas prices and a lack of new investment.
“From an economic perspective, that’s really what we need is some assurance that we can expand oil production and that it will have a pipeline to go into,” said Rob Roach, director of insight on ATB Financial’s economics and research team.
“So that’s the big piece and the one thing we look at a lot is the capital spending in the oil and gas sector and that’s been down. And that’s what we think will be down even more in 2019 until we get that bottleneck solved, and then everything kind of ripples out from there.”
Housing starts are also expected to drop in the province in 2019, falling 13 per cent after a drop of 11.4 per cent in 2018. Non-residential capital expenditures on construction are forecast to shrink by 0.9 per cent.
There is some positive news in the manufacturing sector, according to ATB, with sales up at the beginning of the year and the expectation of stronger performance across all sub-sectors in 2019.
Agriculture and agrifood also show encouraging signs.
The other area of growth is population, with natural increases and international immigration contributing to the rise of 1.9 per cent in 2019 and 1.3 per cent in 2020.
Of course, all of this is dependent on a global system over which the province has little control — Brexit and the China-U.S. trade war among them.
“The global oversupply of crude oil caused the price to collapse in late 2014 and sent Alberta spiralling down into the worst recession in 30 years,” said Hirsch in the release.
“At the moment, domestic challenges to new pipeline development are hindering Alberta’s economy. Hopefully, a major global slowdown will be avoided and not add to the barriers we face.”
The national perspective
On the federal front, the Bank of Canada said on Thursday there are vulnerabilities to the Canadian financial system, including the rising risk of a “severe nationwide recession leading to a rise in financial stress.”
Other areas of concern include climate change, imbalances in housing markets as well as household and corporate debt. Alberta and Saskatchewan have the highest rate of people falling behind on debt payments.
But the bank’s governor isn’t sounding the alarm just yet.
“Global uncertainty is rising, and risks to financial stability have edged up in the past year,” said Stephen Poloz in a news release.
“Still, confidence in the resilience of Canada’s financial system remains high, and we are seeing improvements in some of the key vulnerabilities we’ve been worried about for many years.”