From recovery to expansion: Alberta's economy pushes forward through headwinds
EDMONTON, AB, June 8, 2023 /CNW/ - It has been a rocky road to economic recovery for the province since the 2015 oil price collapse and throughout the global pandemic. Last year marked a significant milestone as real GDP fully recovered from 2014 levels and the economy moved into expansion.
After surpassing 5 per cent growth in 2022, ATB Financial is forecasting the Alberta economy to expand by 2.4 per cent in 2023 and 2.2 per cent next year. The slowdown reflects a softer global backdrop, a pullback in commodity prices, and rising interest rates. ATB has reduced its 2023 forecast from 2.6 per cent in March given the wildfires, renewed financial stress and softening commodity prices since its last forecast.
"Despite the positive expansion of Alberta's economy, it cannot avoid the challenges of inflation and rising interest rates", said ATB Financial's Chief Economist, Mark Parsons. "However, two major peloton forces are helping Alberta draft through the economic headwinds: a mini population boom and strong performance in the energy and agri-food sectors."
ATB's latest economic forecast outlines the challenges facing the province and the key areas boosting Alberta's economy. For a more in depth forecast, ATB introduces high and low scenarios in this edition of the outlook and also includes a special feature on Alberta's demographic trends.
Headwinds
Inflation and the wildfires that started this May are two significant factors challenging the economy. Much like other central banks around the world, the Bank of Canada continues to set high interest rates resulting in high borrowing costs in an effort to reduce inflation. At the same time, the early and intense wildfires that displaced thousands of Albertans, noticeably lowered oil and gas production in May. However, assuming the fires are contained, the impact on real GDP should be much lower than the Wood Buffalo wildfires in 2016.
Peloton Forces
Alberta's year-over-year population growth was 3.7 per cent in January, the highest rate since 1982 and a full percentage point above the national increase. Across multiple sectors, this influx of residents is helping to support a wide range of economic activity while also filling some of the labour vacancies faced by Alberta's employers.
Although below previous energy-driven booms, capital spending by Alberta's oil and gas sector is on the rise along with production. The anticipated completion of the expansion of the Trans Mountain Pipeline will add much-need oil transportation capacity.
As well, Alberta's agriculture and agri-food industry remains strong as it receives a boost from better growing conditions, elevated prices and expanding food processing capacity.
"The lagging impacts of the elevated rates are expected to weigh on consumer spending, home construction and be particularly challenging for anyone holding large amounts of debt relative to their income," added Parsons. "Fortunately, increased energy activity, higher agriculture production and record inflows of international and interprovincial migration will help cushion these impacts, making the province one of Canada's growth leaders."
With $57.5 billion in assets, ATB Financial is a leading financial institution that started in Alberta with the focus of putting people first. Our success comes from our more than 5,000 team members who love to deliver exceptional experiences to nearly 800,000 clients across our Personal and Business Banking, ATB Wealth Management and ATB Capital Markets businesses. ATB provides expert advice, services and products through our many branches and agencies, our 24-hour Client Care Centre, four entrepreneur centres and our digital banking options. ATB powers possibilities for our clients, communities and beyond. More information about ATB can be found at atb.com.
ATB Financial's Economic Outlook is intended for general information and educational purposes only and should not be considered specific legal, financial, tax or other professional advice or recommendations. Information presented is believed to be reliable and up-to-date but it is not guaranteed to be accurate or a complete analysis of the subjects discussed. All expressions of opinion reflect the judgement of the authors as of the date of publication and are subject to change. The actual outcome may be materially different. ATB Financial and any of its affiliates are not liable for any errors or omissions in the information, analysis or views contained in this report, or for any loss or damage suffered. No endorsement of any third parties or their advice, opinions, information, products or services is expressly given or implied by ATB Financial or any of its affiliates and related entities.
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SOURCE ATB Financial
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