Big banks shave 2016 growth outlooks for Canada in wake of Alberta wildfire

The effects of the enormous Alberta wildfire on the ever-crucial oil sector have prompted forecasters to trim their 2016 economic growth predictions for the entire country.

OTTAWA — The effects of the enormous Alberta wildfire on the ever-crucial oil sector have prompted forecasters to trim their 2016 economic growth predictions for the entire country.

Experts, including those from several big banks, have shaved their outlooks in recent days following the huge blaze that tore through Fort McMurray — the heart of oil country.

The emergency forced nearby oilsands facilities to shut down last week, but some have begun to restart their operations. More are expected to get back to work over the coming days.

But even temporary closures in the economically important industry are expected to have an impact on the Canada-wide real gross domestic product.

In many cases, the updated real GDP projections also reflect disappointing economic data releases in recent weeks for trade and the labour force.

Since the fire, TD knocked its 2016 real GDP projection down to 1.6 per cent from 1.9 per cent — 0.2 percentage points of which it attributed to the wildfire.

BMO clipped its prediction to 1.6 per cent from 1.8 per cent — evenly dividing the blame for the drop between the poor economic numbers and the disaster.

CIBC lowered its outlook from 1.6 per cent to 1.5 due entirely to the fire.

At this early stage, however, economists stressed that their predictions remain in flux as officials and companies gain a better understanding of the situation.

“Anyone who is doing this today is still making some big guesses about how the oil facilities and the rest of the town are going to come back,” said CIBC chief economist Avery Shenfeld.

Forecasters expect the wildfire to contribute to flat growth or even a contraction in the second quarter of the year. They now expect the economy to rebound with stronger growth in the third quarter.

BMO chief economist Doug Porter said losing activity early in a given year, even if it’s regained later on, usually means the economy will still suffer a slight loss for the year as a whole.

The wildfire, which has spread across about 2,300 square kilometres and continues to burn, destroyed about 10 per cent of Fort McMurray’s 25,000 buildings. More than 80,000 people were evacuated from the northern Alberta community.

“Thank goodness most of the city was spared — the vast majority of it — and fortunately most of the (oilsands) facilities were, at the end of the day, unaffected,” Porter said.

“It certainly could have been much worse.”

Todd Hirsch, chief economist for ATB Financial, said a week ago there was talk of a “worst-case scenario” where it would be weeks or even months before operations restarted.

“Workers are returning and the situation with the fire has been, I guess, perhaps not quite as bad as what was first feared, although still tragic and a disaster,” Hirsch said Thursday.

Still, the fallout from the wildfire and the production shutdowns were severe enough to compound ongoing troubles in a province that has been Canada’s economic engine for years.

Before the fire, the provincial and federal treasuries were already under intense fiscal pressure from still-low oil prices that started to plummet nearly two years ago.

Both governments are expected to allocate large sums to cover the costs of things like firefighting and reconstruction.

For example, Ottawa spent more than $1.3 billion to respond to the massive 2013 floods in southern Alberta and southeastern British Columbia, according to a February report by the parliamentary budget officer.

Porter said the federal government should have more than enough cushion with its much-debated, $6-billion annual risk adjustment that it included in its March budget.

The government has said it included the contingency padding, which was much-larger than usual, in case the country’s economic performance turns out to be weaker than experts have predicted.

Critics have said the Liberals made the adjustment bigger than necessary to allow them to reap the political benefits of beating expectations.

But even with the unexpected wildfire costs, Porter still expects the Ottawa’s 2016-17 shortfall to be smaller than the projection of nearly $30 billion outlined in the budget.

“I would say it’s early days yet to talk about the fiscal implications, although I suspect the federal government will contribute heavily,” Porter said.

“I don’t dare put a figure on it at this point.”

Just Posted

Man from Olds killed in collision near Sundre

A 39-year-old man from Olds was killed in a collision near Sundre… Continue reading

Tips to keep crime at bay this Christmas

’Tis the season for joy and celebration, but the Christmas season can… Continue reading

Olympic ski run designer creates upgrades at Canyon Ski Resort

Jeff Ihaksi says free-style and alpine ski venues are Canada Winter Games-worthy

Updated: Collision expert backs version of crash of driver accused of manslaughter

Daniel Newsham accused of manslaughter in fatal 2016 collision

WATCH: More than 100 protest UN migration pact, carbon tax in Red Deer

Chants of “Trudeau must go” echoed through the streets of downtown Red… Continue reading

Tkachuk’s goal in 3rd gives Flames 2-1 win over Wild

ST. PAUL, Minn. — Matthew Tkachuk scored the go-ahead goal midway through… Continue reading

Women use scent to lure wolf-dog that ran away from Calgary airport

EDMONTON — A woman from Alberta is thanking an unconventional strategy for… Continue reading

Suspect in Alberta, Saskatchewan bank robberies to get mental assessment

MEDICINE HAT, Alta. — A former Winnipeg broadcaster and journalism instructor accused… Continue reading

Trudeau to make it harder for future PM to reverse Senate reforms

OTTAWA — Justin Trudeau says his government hopes to make legal changes… Continue reading

No winning ticket for Friday night’s $60 million Lotto Max jackpot

TORONTO — There was no winning ticket for the $60 million jackpot… Continue reading

All evacuation orders lifted in deadly California wildfire

PARADISE, Calif. — All evacuation orders have been lifted in Paradise more… Continue reading

All aflutter about our feathered friends

Christmas Bird Count will be held Dec. 23

Baylor ties pervade rape case that sparked uproar

DALLAS — The Texas judge who approved a plea deal allowing a… Continue reading

Most Read