Report says Alberta’s economy slowly on the mend
A newly released report into the province’s economic outlook shows that two years after one of the most severe downturns, things are looking up.
TD Bank’s Economic Forecast says that a return to normalcy could happen within the next year or so, but there are quite a few things to be optimistic about at this point.
“Within the energy sector, clearly there are some headwinds to growth, market access being one of them. But I see a lot of scope for growth outside of energy, more value-added type energy activities like petrochemicals. The low feed stock is something I think is a strength for Alberta,” said Derek Burleton, VP and deputy chief economist with the TD Bank Group. “I’m optimistic that, yes, we face some risks, certainly around oil and gas extraction in particular, but I see other areas that can step up and drive growth longer run and essentially reassert Alberta as one of the leading growth provinces in Canada.”
Burleton says that there are some serious challenges in the days ahead.
“The Achilles’ heel right now is investment, there’s no doubt. We’re seeing growth in service activity; we’re seeing growth in manufacturing, exports to the United States; that’s where the moderate growth is coming from. What we’re not seeing is a lot of new investment. Part of that is due to some of these hurdles, regulatory, market access.”
The report predicts that Alberta’s GDP will level out after last year’s jump of five percent and Burleton says that growth will slow into a more gradual rate.
“That’s about twice the rate that many had thought heading into 2017 but still, you look at broader indicators like employment and it still feels like things are only gradually improving.”
The report outlines eight pieces of evidence to show that Albertans should have optimism in the economic growth of the province, including the continued reliance of the global economy on oil and the limited supply outside of Alberta. Production costs within the province are also continuing to drop and that is creating a lot of opportunities within the oil and gas sector.
Outside of oil, Alberta also has a burgeoning high-tech sector including advancing developments in artificial intelligence.
Burleton says that while that technology won’t replace the oil and gas sector, it shows that Alberta does have some solid strength in innovation.
“AI is one of those sectors within high-tech that Alberta does have strength at the University of Alberta. Certainly, that’s the type of innovation potential that I think will help longer run [and] hopefully we can see more growth in sectors of that nature.”
Another piece of evidence is that a good part of Alberta’s workforce is relatively young, in comparison to the national average, and that creates future growth potential and high labour force participation.
Despite Calgary still experiencing high unemployment numbers, Burleton says that the rate has come down quite a bit.
“It’s a notoriously volatile survey,” he says. “I think more importantly the types of jobs, a lot of self-employed type positions on a trend basis, this to me is a first step for an economy that’s recovering and, over time, I can see more of a shift over to full-time positions within the private sector and that’s something we’ve got baked into our outlook.”
He does say that there is still a great deal of caution that one needs to take into account when considering the strength of the economy and it’s true that it could be too soon to ‘go all in’ but it’s not just in our province.
“I can see why there’s caution. There’s caution around some of the risks there are for market access for pipelines, there are risks around the broader environment; NAFTA risks, there are risks around emerging markets. This is a global thing.”
Burleton adds that 2019 could also see some added relief with Line 3 coming online. That project is expected to increase Alberta’s export capacity by 375,000 barrels per day.
(With files from Mark Villani and Chris Epp)