After a phenomenal rate of economic growth between 2010 and 2014, when Alberta’s real gross domestic product grew by an average of 5.4 per cent per year, the provincial economy contracted by 3.7 per cent in 2015 and by another 3.5 per cent in 2016.
This downturn erased $37.5 billion of economic output over just two years, says a report by ATB Financial’s economics and research team.
“GDP rebounded in 2017, rising by 4.8 per cent or about $15.6 billion. Growth continued in 2018, but was much slower at 1.6 per cent, adding just $5.4 billion to the economy. The hole dug by the recession was so deep that by the end of 2018, our real GDP was still 1.0 per cent ($3.6 billion) below where it was in 2014,” said the report.
“We have even more ground to make up when we take population growth into account. On a per capita basis, we are 6.0 per cent behind where we were in 2014. Admittedly, 2014 was a peak year for the provincial economy, but the statistical drop in GDP still stings and is felt by real people in the form of unemployment, struggling businesses and other hardships.”
And a report by the Conference Board of Canada indicates there’s no relief this year as the province is expected to hit another recession.
The board’s Metropolitan Outlook report says Alberta will suffer a mild economic contraction in 2019 as the energy sector reacts negatively to mandated production cuts. GDP is expected to contract by 0.8 per cent as output in the drilling sector will decline by about one-third in 2019 compared with 2018.
“Although business investment in the province is expected to fall this year, it will finally increase in 2020 after five straight years of decline,” says the report.“Looking beyond 2019, the construction of petrochemical plants in the province will add to Alberta’s economy despite energy sector uncertainty.”
The report said labour markets will feel the impact of the contraction in real GDP growth, but employment is still expected to rise this year. With much of the turmoil concentrated in the energy sector, where output per worker skyrocketed in recent years and much of the industry’s restructuring occurred in the deeper 2015-16 recession, the number of layoffs in the energy sector will be limited, it said.
“Still, many of the job losses in the drilling sector will not be recovered over the next few years, given the volatility and uncertainty seen in recent years. Indeed, employment gains will be concentrated in the services sector. In all, steady population growth and improving labour demand will result in average annual employment growth of 1.6 per cent from 2019 to 2023,” said the conference board.
“The unemployment rate in Alberta is set for two year-over-year increases in 2019-20 as the labour force increases at a faster pace than employment. However, the unemployment rate will then drop from 7.1 per cent in 2020 to 6.2 per cent in 2023 as disruptive factors impeding economic growth dissipate.
“Overall business investment is expected to fall once more in 2019 as the fallout from the mandatory oil production cuts ripples through the energy sector. Many in the energy sector have delayed investment plans. Imperial Oil put its Aspen oil sands project on hold this spring, delaying the project by a year. In addition, drilling completions will fall by about one‐third in 2019 compared with the previous year. Drilling activity in the province has a significant economic footprint, given the supply‐chain links between oil and gas producers and other sectors in the province.”
The report said the future of energy investment depends in large part on new pipeline projects. The restart of construction on the Trans Mountain pipeline expansion project will help boost investment, although there has been so much uncertainty surrounding this project that it is not included in our forecast numbers. This pipeline is expected to add transport capacity of about 590,000 barrels per day, a significant boost for the oil sands. Further gains from this pipeline may come in the form of an uptick in upstream investment as producers look to expand current operations or even see a new mega-project take off, added the conference board.
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