Mild recession forecast for Alberta this year

Alberta will experience a mild recession this year, according to a new report by the Conference Board of Canada.

It will mark the third year in the past five years that the province has seen an economic contraction. Both 2015 and 2016 were down years following the collapse of oil prices in the latter half of 2014.

Marie-Christine Bernard
Marie-Christine Bernard

“With Alberta still facing ongoing pipeline transportation capacity issues, the prospects for the energy sector have not improved despite the provincial government’s relaxing mandatory oil production cuts. Permitting delays in Minnesota mean that the Enbridge Line 3 project, projected to add 370,000 barrels a day of export capacity of Canadian crude, won’t open until the second half of 2020, a year later than expected. This is dampening energy companies’ investment intentions for further developing the oil sands and is sparking concerns that the mandatory oil production cuts could continue into next year,” said the Provincial Outlook Economic Forecast, which was prepared by director Marie-Christine Bernard and the provincial forecast team, under the general direction of chief economist Pedro Antunes.

“Prospects for the Alberta economy are weak this year; Alberta, along with Saskatchewan, will be facing a contraction in overall real GDP growth of 0.8 per cent in 2019, not nearly as severe as the 2015–16 recession. However, the Enbridge Line 3 project will eventually provide more transportation capacity, and that should help turn around energy investment. Although there is great uncertainty about capital spending plans in the energy sector, we are nonetheless forecasting a rebound in the Alberta economy next year.”

The report said business sentiment in the energy sector remains negative.

“The industries hit the hardest in 2019 in Alberta are construction and drilling, which will register declines of 10.4 and 30.3 per cent respectively for the year. Both declines are in large part due to the position of companies in the oil and gas sector regarding the uncertainty regarding pipelines. The Enbridge Line 3 pipeline was hit with a new obstacle earlier this summer when a set of appeals was successful in sending Enbridge back to the assessment stage to address the possibility of a spill in Lake Superior. The only chance of additional capacity being built at this time depends on whether the $3.7-billion government rail contract is successfully picked up by the private sector.”

The report said the construction of petrochemical complexes in the province will add firepower to Alberta’s economic engine despite its energy sector being clouded with uncertainty.

It said momentum is picking up for the Canadian economy but it’s projected to grow by just 1.4 per cent in 2019.

The outlook for 2020 is somewhat brighter, as a pickup in investment spending and trade should help the economy post growth of 1.8 per cent, it said.

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