A modest recovery for Alberta in 2016 “is in the cards” according toThe Conference Board of Canada’s Provincial Outlook. The news is part of additional positive growth news for BC and Quebec.
After a drop of 1.2 per cent in 2016, read GDP growth of 1.2 per cent is forecst for 2016.
“Difficulties in the energy sector, along with severe drought and forest fires, took the wind out of Alberta’s economic sails this year,” notes Marie-Christine Bernard, associate director, provincial forecast, The Conference Board of Canada. “The province will continue to feel the effects from the difficulties in the energy sector but a slight improvement in oil prices and increased public infrastructure investment should help Alberta stave off a recession in 2016.”
As the year comes to a close, the outlook for the oil industry is still grim with oil prices remaining at a just a fraction of what they were a year ago. As a result, energy companies continue to be cautious about their capital plans. Energy investment has fallen by 15.2 per cent this year and will pull about $11 billion out of the economy by the end of 2016. Investment will be slow to recover and is not expected to return to the level seen before the crude prices collapse within the next five years.
The plunge in oil prices is also putting a damper on consumer spending. Retail sales are expected to decline by close to 3 per cent this year and to remain anaemic over the next two years as Albertans will not only be facing weak job prospects but also a rising fiscal burden in 2016. Alberta’s unemployment rate is expected to reach 6.7 per cent in 2016 and employment growth will be limited to 1 per cent over 2016-17.
However, it is not all bad news for Alberta’s economy. Bitumen exports to the U.S. continue to be strong and non-conventional oil production is set to increase by an average of 4.9 per cent annually over the next five years, though profit margins will be affected by lower oil prices. In addition, the provincial government’s plan to invest billions on infrastructure projects, including schools, hospitals and roads over the next few years will help offset some of the impact of lower crude prices on the economy.
