Oil to fuel growth

Mike Drotar has included plenty of Christmas cheer in his final economic forecast of 2010.

Mike Drotar

Mike Drotar

Mike Drotar has included plenty of Christmas cheer in his final economic forecast of 2010.

Servus Credit Union’s vice-president treasury is predicting “robust economic times” within the next two years, especially in the central and northern parts of Alberta. Growth in the province, expected to average three per cent this year, should hit 3.7 per cent in 2011 and 3.9 per cent in 2012, he said.

“The global recovery seems to be catching some traction,” said Drotar, adding that talk of a double-dip recession has subsided.

Stronger oil prices — pushed upward by the improved economic outlook, geopolitical risks and future supply concerns — will fuel the province’s economic good fortune, he added.

“I believe it’s headed toward triple digits. It could be 2011, it could be within two years.”

Even natural gas looks a little better, with prices expected to average between $4.75 and $6.75 over the next two years.

The economic rebound should push Alberta’s unemployment rate back below six per cent by 2012, said Drotar. With an aging workforce, that could create some challenges for employers, he suggested.

The loonie is expected to trade above par and could average as high as US$1.03, said Drotar.

Nationally, economic growth is expected to jump from 2.7 per cent this year to 3.1 per cent in 2011 and 3.5 per cent in 2012.

Drotar said the recent strong performance of the equity markets should continue, with the Toronto Stock Exchange returning to its July 2008 high by 2012.

“I think in the future it’s going to be driven in large part by the energy and dividend stocks.”

Drotar pointed out that the outlook for the global economy has also improved considerably in recent months. Growth worldwide is expected to exceed four per cent over the next three years, with China averaging close to 10 per cent.

The United States economy is expected to grow by more than three per cent in 2011 and 2012, although the unemployment rate there is projected to hover around nine per cent for the next two years.

Steps to address the massive U.S. debt could adversely impact the standard of living there, suggested Drotar.

Drotar, who is based in Edmonton, has been assessing the economy and financial markets for more than 20 years. He worked for Servus in Red Deer until earlier this year.