OTTAWA, March 8, 2016 /CNW/ - On the heels of an estimated 2.9 per cent contraction last year, Alberta's economy is expected to shrink by a further 1.1 per cent in 2016, according to The Conference Board of Canada's Provincial Outlook: Winter 2016.
"With oil prices continuing to feel the pressure of bloated global inventories and rising supply, the outlook is grim for the energy sector and Alberta's economy as a whole," said Marie-Christine Bernard, Associate Director, Provincial Forecast. "The number of rigs drilling in January was extremely low and oil producers are planning another round of cuts to capital budgets. The impact on jobs, housing markets, consumer spending, and supplier industries will result in continued recession for Alberta this year."
- On the heels of an estimated 2.9 per cent contraction last year, Alberta's economy is expected to shrink by a further 1.1 per cent in 2016.
- Energy investment in Alberta is expected to fall $6 billion this year.
- B.C.'s economy will outpace all other provinces this year, posting real GDP growth of 2.7 per cent. Aside from B.C., only Ontario, Manitoba, and Nova Scotia can expect to see their economy grow by more than 2 per cent this year.
Energy companies are reacting to their squeezed cash flow by planning a second round of cuts to investments. Energy investment in Alberta could fall another $6 billion this year, following a $10 billion drop last year. The Conference Board expects the supply and demand imbalances in crude oil markets to stabilize toward the end of this year, and bring crude prices back up to the mid-US$40s range by 2017. However, this remains below the breakeven point for some producers in the province.
Alberta's unemployment rate soared to 7.4 per cent in January, the highest since March 1999, as employers continued to trim their workforce to align with weaker demand for their products and services. The jobless rate will continue to creep up through the first half of this year before starting to fall gradually as discouraged workers exit the labour force and inter-provincial migration turns negative.
Not surprisingly, consumer confidence in Alberta has also plummeted and that is dragging down household consumption, in particular purchases of big-ticket items such as homes and cars.
One bright spot for the economy will be public infrastructure spending. The provincial and federal governments are planning massive infrastructure programs to help stimulate the ailing economy. However, this will not be enough to compensate for the difficulties in the energy sector.
More stable conditions in key sectors should help Alberta's economy turn around starting next year. However, considerable uncertainty remains about how long the imbalances in oil market will persist and how quickly oil prices will pick up.
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SOURCE Conference Board of Canada
Image with caption: "Real GDP by province in 2016 (CNW Group/Conference Board of Canada)". Image available at: http://photos.newswire.ca/images/download/20160308_C3035_PHOTO_EN_637512.jpg
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