New report suggests Alberta could slip into recession
Published Wednesday, May 29, 2019 7:04AM MDT
Last Updated Wednesday, May 29, 2019 12:58PM MDT
A new report from the Conference Board of Canada suggests Alberta could fall back into a mild recession this year.
In February, the Conference Board originally expected Alberta’s economy to grow by 1.3 per cent in 2019, but now forecasts the economy to shrink by 0.1 per cent.
The report cites a number of reasons for the economic dip, including the Alberta government's decision to curtail oil production and the recent troubles with China.
The Conference Board says the cut in oil production helped boost profits for the energy sector, but also meant less drilling activity and less spending by companies.
“Investment levels will sink to even more depressed levels as the energy sector struggles,” the report read. “Drilling investment will take a major tumble, as producers have either delayed spending until times are more certain or they have shifted their capital to south of the border.”
Drilling has decreased as the Petroleum Services Association of Canada lowered its drilling forecast earlier this month.
It now forecasts 5,300 oil and gas wells will be drilled across the country, down from an estimate of 5,600 wells in January. That number is a 20 per cent drop from the original 6,600 wells forecasted back in November 2018.
The Conference Board says pipeline constraints and uncertainty on how to get Canadian oil resources to tidewater continues to cast a shadow. Falling construction levels and high unemployment rates have also been a growing concern.
Alberta’s finance minister, Travis Toews, weighed in on Tuesday's report.
He says Premier Jason Kenney and the UCP government will combat economic struggles by eliminating the carbon tax on residents, cutting cutting corporate taxes starting July 1, and reducing the minimum wage for youth.
“There’s no doubt there are significant challenges ahead for Albertans,” he said. “We are committed that combined our strategy of creating the most competitive business environment will attract significant investment back into this province. Were also counted to balancing the budget in the first term, we know that’s not going to be easy, but we will follow through with those commitments.”
That being said, the Conference Board does expect the Alberta economy to bounce back with several multi-billion dollar construction projects now underway, including a pair of petrochemical plants.
As oil production cuts are also expected to be lifted, the board predicts Alberta’s economy will bounce back to the highest in the country by 2020, with growth of 2.7 per cent.
Meanwhile, economists with ATB Financial don’t expect Alberta will face a recession.
The Alberta-based bank predicted the province would face economic struggles this year, cutting its growth forecast in half from where it was in March. However, ATB still forecasts a real GDP growth of 0.7 per cent in 2019, improving to 1.6 per cent in 2020.