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 arrested in 2014 drug bust finally getting sentenced

Convicted drug dealer unsuccessfully tried to get case thrown out because of delays

New trail being developed through North Red Deer woods

This forest belt is known for having rough sleeper camps

Moms visit Red Deer’s overdose prevention site

Moms Stop The Harm meet in Red Deer

Lacombe County land dispute to be resolved

Landowners next to new Kuhnen Natural Area feared trespassing and liability issues

Average fall, cold winter ahead, The Weather Network predicts

Canadians can expect average temperatures this fall that will give way to… Continue reading

WATCH: 2019 Canada Winter Games will leave a lasting legacy, say organizers

It leaves Red Deer with the infrastructure and confidence to host future such events

Your community calendar

Wednesday Central Alberta Historical Society annual general meeting is 6 p.m. at… Continue reading

Opinion: City must aim for zero per cent tax hike

Red Deer city council is discussing the benefits of multi-year budgets, which… Continue reading

NHL players stay with CBA, labour peace set to at least 2022

The National Hockey League will play its next three seasons without the… Continue reading

Tre Roberson, Stampeders edge Tiger-Cats for third win in a row

Stampeders 19 Tiger-Cats 18 CALGARY — A little bit of insight from… Continue reading

Veteran quarterback Harris’s status questionable for Edmonton Eskimos

He’s one of only two CFL quarterbacks to start all of his… Continue reading

Rapid rise of co-working providing needed space as big cities feel crunch

TORONTO — When Rahul Raj was ready to move his small but… Continue reading

No Deal: Auto workers strike against GM in contract dispute

DETROIT — More than 49,000 members of the United Auto Workers walked… Continue reading

CREA reports August home sales up from year ago, raises forecast for 2019

OTTAWA — The Canadian Real Estate Association raised its forecast for home… Continue reading

Most Read