ATB Financial senior economist Todd Hirsch gives a presentation at the Holiday Inn at Gasoline Alley for a Red Deer Chamber of Commerce audience.

ATB Financial senior economist Todd Hirsch gives a presentation at the Holiday Inn at Gasoline Alley for a Red Deer Chamber of Commerce audience.

Outlook upbeat, risks remain in Alberta economy

A prominent Alberta economist served up an appetizing outlook for the province at a Red Deer Chamber of Commerce luncheon on Wednesday.

A prominent Alberta economist served up an appetizing outlook for the province at a Red Deer Chamber of Commerce luncheon on Wednesday.

But Todd Hirsch also cautioned that his upbeat predictions for Alberta in 2012 could turn sour.

Hirsch, who is senior economist with ATB Financial, described how the province came through 2011 in “fantastic condition,” with real GDP growth of about 3.8 per cent.

“That’s an outstanding rate of growth, considering we’re a mature economy, and considering everything else that’s going on around the world in Europe, the United States and elsewhere.”

He expects more of the same in 2012, with anticipated growth of three to 3.5 per cent a desirable rate.

“We actually don’t want provincial growth ramping up to four, five or six per cent,” said Hirsch, explaining that labour shortages, tight rental markets and other imbalances could result.

“Faster is not always better.”

Alberta’s good fortunes reflect strong oil prices, which Hirsch anticipates will remain between US$100 and $115 this year. But that’s dependent on events elsewhere.

“If geopolitical tensions do intensify in 2012, it’s very possible we could see these oil prices at $120, or $130 or $150 a barrel. Or, if things got very extreme, they could hit $200.”

Even at $150, warned Hirsch, the result could be another global recession and a collapse in oil prices reminiscent of 2008.

When it comes to Alberta’s economic health, Asia — and especially China — is the place to watch, he said. That’s because it’s the Asian countries that are expected to drive global growth in 2012.

China finds itself in a balancing act, said Hirsch. If growth there is too rapid, inflation could result; if it’s too slow, migrant workers moving from rural to urban areas will lack work.

Longer term, he believes China could face problems as a consequence of the one-child policy it implemented three decades ago.

“Now there are fewer young people coming into the job market as there are those who are going to soon be leaving the job market. That will hurt China and its economy in the next decade or so.”

Meanwhile, Europe continues to teeter on the precipice of government debt defaults and banking failures, noted Hirsch, describing the situation as one that could go either way.

“Their economy will either be in a very mild recession or flat growth at best, or they will be in a very severe recession.”

In the latter case, the American and global economies could end up being dragged down as well.

On a more positive note, Hirsch pointed out that some economic indicators in the U.S. did improve in the final quarter of 2012 — most notably those related to the housing and labour markets. And despite some risky monetary policies of the Federal Reserve to stimulate spending, the country has so far avoided inflation and a currency collapse.

Hirsch’s rosy predictions for Alberta don’t extend to Ontario and Quebec, which he said will continue to face rising unemployment and a sluggish manufacturing sector.

“Overall, 2012 is not going to be a fantastic year for the Canadian economy,” he said. “But the pain and the challenge will be focused in Central Canada.”

hrichards@bprda.wpengine.com

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