Uncertainties in the oil and gas industry and government deficits have weakened industry sentiment that Alberta is economically resilient, according to a report released Monday by the Alberta Council of Technologies (ABCtech).
The report also said there’s an associated decline in the sentiment that the province’s innovation ecosystem is effective for supporting small business innovation and diversification of the economy.
“Alberta sentiment weakened further in fall ’18 for both economic resilience/ diversification and the effectiveness of it’s innovation ecosystem,” said the report. “The widespread gains since ’15 in economic resilience have reversed and is particularly extreme for the Calgary region and government and public policy. All industries/professions – other than education and research – have declined.
“The shock is attributed to economic uncertainties in the oil industry: pipeline delays and the discounted price of oil, and the Alberta government’s revenue vulnerability: budget deficits and debt.”
ABCtech released economic updates every April and October, summarizing the sentiments of its members and those of the Economic Developers of Alberta.
It said a survey illustrates Alberta’s continuing economic vulnerability to being overly dependent on a single industry and the inadequacy of its innovation ecosystem to spur a transition.
The report said the job market in the Calgary region will remain weak until access to energy markets improves. It also said job losses have affected all Alberta industries except education and research. While Edmonton and other regions were also weak, they appear less vulnerable – showing two years of slow but steady progress in economic diversification, added the report.
ABCtech said government revenues will suffer and deficits will continue affecting all industries until pipelines are approved and the price differential for a barrel of oil shrinks.
“Data is one thing, sentiment another,” said Perry Kinkaide, ABCtech’s chief executive. “The survey and visitors to Calgary are aligned – we have a problem of our own making, but it is compounded now by governments.”
He said Alberta’s economy is not diversified and remains heavily reliant on public sector spending, financed largely from the oil industry.
“Unfortunately, until geo-political forces lighten up, we have only the ‘innovation hope chest’ to turn to,” said Kinkaide.
But fundamental to diversification of Alberta’s economy is the contribution of small business innovation. However, the report said innovation is stymied by government regulations and archaic purchasing practices, a lack of small business investors, and a get-rich-quick culture in the oil industry.
“Alberta’s so called innovation ecosystem – the networks and array of resources needed to incubate success – is immature and reliance on governments makes it vulnerable,” said ABCtech.
“A two-year-long upswing in establishing an effective innovation ecosystem seems to have lost momentum. Survey respondents stated government should promote small business innovation through facilitating policies and by negotiating favourable trade agreements.”
Mario Toneguzzi is a veteran Calgary-based journalist who worked for 35 years for the Calgary Herald, including 12 years as a senior business writer.