Strength in oil and gas is an enormous factor in Canada’s economic health along with that of Alberta and Red Deer, says a leading economist.
Calgary-based Mike Holden, Senior Economist for the Canada West Foundation, told local business leaders on Tuesday that the entire country’s economic outlook would be flat without a healthy oil and gas sector.
“Extractive industries are driving the entire national economy at this point,” Holden said in his presentation to the Annual General Meeting of Central Alberta Access Prosperity, a regional economic development partnership.
Alberta’s economy has seen a solid recovery since 2010, with the evidence pointing to another solid and even better year in 2012, said Holden.
“It’s because of the oil and gas sector and oilsands development in particular,” he said.
Investment in the private sector has increased and commodity prices are strong, including agricultural products as well as in the energy and metal sectors, said Holden.
“The only area where we haven’t seen a general strengthening of commodity is in the forestry sector, where a combination of factors has produced weak conditions.”
Job growth has been steady as well, with the number of jobs lost during the recession now being recovered with few signs so far of a labour crisis such as that which occurred before the recession.
While giving an optimistic outlook for 2012, Holden pointed to a number of factors that cast a shadow of gloom, including the potential for another banking crisis in Europe if one or more countries including Greece, Italy, Portugal and Spain default on their debt.
European banks are still weak from the last financial crisis, which would lead them to a new crisis if there is enough default.
“The best case scenario that we could hope for coming from Europe would be a slow and orderly default in Greece and that the EU (succeeds) in containing the debt crisis to that area and restoring confidence to other European economies.”
Conditions in the United States also look ominously similar to what happened in Japan in the 1980s, which would also have an effect on economic health in Canada, he said.
Unpredictable events, such as large-scale disasters, can also wreak havoc on economice forecasts, said Holden.
He compared forecasting the economy to forecasting the outcome of a hockey game. Sports analysts can make a reasonable prediction based on statistics and past performance, but someone else can guess a score of three to two and come up with a winner, he said.