Conference Board sees Alberta economy shrinking in 2015
The collapse in oil prices will send Alberta’s economy into a tailspin that will see the provincial economy contract 1.5 per cent this year, the Conference Board of Canada said Monday.
“The party appears to be over in Alberta, at least over the medium term, as low oil prices send chills through the economy,” Marie-Christine Bernard, associate director of the provincial forecast, said in a news release. “In the next couple of years, a return to four per cent-plus growth is not in the cards, since oil prices will not hit triple-digits any time soon under current market conditions.”
The board’s latest outlook is a stark reversal of its November forecast that said Alberta’s economy was “firing on all cylinders” and expected to lead the country with 4.4 per cent growth in 2015. This latest forecast said Alberta is now expected to have the country’s worst economic performance this year.
Prince Owusu, a senior economist with the board, said the full effect of oil price declines has become more clear since the fall.
“We have a completely different picture going forward than we had assumed in the past,” he said. “We didn’t think it had that momentum to drop (that much).
Owusu said the board expects oil prices to average $56 for 2015, with a small rebound in the spring. Benchmark West Texas Intermediate crude was trading below $50 US on Monday.
Alberta has experienced negative economic growth only once since 1988, when it declined by 4.2 per cent in 2009. Calgary has seen a decline in its economy twice in that period — by 1.9 per cent in 1989 and by 4.1 per cent in 2009.
Over that period, the highest rate of growth for Calgary was 7.9 per cent in 1997 and 8.1 per cent for the province in 1997.
Last year, Calgary’s economy grew by 4.4 per cent while Alberta’s rose 4.0 per cent.
“I would think that based on how strong the performance was for the (energy) industry for the majority of last year versus where we’re likely to spend most of the time this year, a contraction is probably within the realm of reality,” said Adam Legge, president and chief executive of the Calgary Chamber of Commerce.
“It’s reflective of the low commodity price environment and less activity happening and less investment happening.”
Todd Hirsch, chief economist with ATB Financial, said forecasters are moving to either much weaker growth or contraction in Alberta.
“The Conference Board, I think they’re probably the outlier at this point with the forecast for the deepest contraction,” he said. “But we still think that energy prices are going to rebound somewhere in the second half of the year and Alberta will avoid an outright contraction.”
Calgary Economic Development president and CEO Bruce Graham said predicting economic growth based on oil prices is extremely difficult as demonstrated by the Conference Board’s reversal.
“I wouldn’t be surprised if the predictions change again as things evolve,” he said. “That said, obviously the sudden drop and the significance of the change has caused a lot of people to be concerned and to make very significant responses to the changing economy in terms of both reducing capital spending, cutting costs including layoffs. Certainly we’re seeing a very immediate impact on that.”
The Conference Board report said planned reductions in oilpatch investments are already being felt, with the oil rig count down 40 per cent in the first week of February. It said layoffs will hit the housing market and overall consumer confidence as well as slow in-migration to the province.
The report said the slowdown in Alberta’s economy has far-reaching effects, as many out-of-province workers fly in and out of the province to work in the oilpatch or in construction. It estimates $375 million in income is generated in Atlantic Canada from these workers.
The Conference Board said the provincial government has benefited from 29 per cent of its revenues coming from the resource sector over the past 10 years, but will obviously be hit this year with the slowdown in that industry.
“One bright spot for Alberta producers is strong demand for heavy oil in U.S. Gulf Coast refineries. Thanks to past investment, the energy sector has available capacity and it is able to increase non-conventional production,” said the report.
Nationally, the Conference Board said the Canadian economy will drop to 1.9 per cent growth this year from 2.4 per cent in 2014.
mtoneguzzi@calgaryherald.com
Twitter.com/MTone123
Conference Board sees Alberta economy shrinking in 2015 | Calgary Herald
The collapse in oil prices will send Alberta’s economy into a tailspin that will see the provincial economy contract 1.5 per cent this year, the Conference Board of Canada said Monday.
“The party appears to be over in Alberta, at least over the medium term, as low oil prices send chills through the economy,” Marie-Christine Bernard, associate director of the provincial forecast, said in a news release. “In the next couple of years, a return to four per cent-plus growth is not in the cards, since oil prices will not hit triple-digits any time soon under current market conditions.”
The board’s latest outlook is a stark reversal of its November forecast that said Alberta’s economy was “firing on all cylinders” and expected to lead the country with 4.4 per cent growth in 2015. This latest forecast said Alberta is now expected to have the country’s worst economic performance this year.
Prince Owusu, a senior economist with the board, said the full effect of oil price declines has become more clear since the fall.
“We have a completely different picture going forward than we had assumed in the past,” he said. “We didn’t think it had that momentum to drop (that much).
Owusu said the board expects oil prices to average $56 for 2015, with a small rebound in the spring. Benchmark West Texas Intermediate crude was trading below $50 US on Monday.
Alberta has experienced negative economic growth only once since 1988, when it declined by 4.2 per cent in 2009. Calgary has seen a decline in its economy twice in that period — by 1.9 per cent in 1989 and by 4.1 per cent in 2009.
Over that period, the highest rate of growth for Calgary was 7.9 per cent in 1997 and 8.1 per cent for the province in 1997.
Last year, Calgary’s economy grew by 4.4 per cent while Alberta’s rose 4.0 per cent.
“I would think that based on how strong the performance was for the (energy) industry for the majority of last year versus where we’re likely to spend most of the time this year, a contraction is probably within the realm of reality,” said Adam Legge, president and chief executive of the Calgary Chamber of Commerce.
“It’s reflective of the low commodity price environment and less activity happening and less investment happening.”
Todd Hirsch, chief economist with ATB Financial, said forecasters are moving to either much weaker growth or contraction in Alberta.
“The Conference Board, I think they’re probably the outlier at this point with the forecast for the deepest contraction,” he said. “But we still think that energy prices are going to rebound somewhere in the second half of the year and Alberta will avoid an outright contraction.”
Calgary Economic Development president and CEO Bruce Graham said predicting economic growth based on oil prices is extremely difficult as demonstrated by the Conference Board’s reversal.
“I wouldn’t be surprised if the predictions change again as things evolve,” he said. “That said, obviously the sudden drop and the significance of the change has caused a lot of people to be concerned and to make very significant responses to the changing economy in terms of both reducing capital spending, cutting costs including layoffs. Certainly we’re seeing a very immediate impact on that.”
The Conference Board report said planned reductions in oilpatch investments are already being felt, with the oil rig count down 40 per cent in the first week of February. It said layoffs will hit the housing market and overall consumer confidence as well as slow in-migration to the province.
The report said the slowdown in Alberta’s economy has far-reaching effects, as many out-of-province workers fly in and out of the province to work in the oilpatch or in construction. It estimates $375 million in income is generated in Atlantic Canada from these workers.
The Conference Board said the provincial government has benefited from 29 per cent of its revenues coming from the resource sector over the past 10 years, but will obviously be hit this year with the slowdown in that industry.
“One bright spot for Alberta producers is strong demand for heavy oil in U.S. Gulf Coast refineries. Thanks to past investment, the energy sector has available capacity and it is able to increase non-conventional production,” said the report.
Nationally, the Conference Board said the Canadian economy will drop to 1.9 per cent growth this year from 2.4 per cent in 2014.
mtoneguzzi@calgaryherald.com
Twitter.com/MTone123
Conference Board sees Alberta economy shrinking in 2015 | Calgary Herald
