Alberta to face mild recession in 2019, bounce back in 2020

Photo via Conference Board of Canada

The Canadian economy is showing improvement, but Alberta economy is doing the opposite, according to a new report.

The Conference Board of Canada report states Alberta will face a mild recession this year. The report shows Canada’s overall economic growth will be 1.4 per cent this year, but Alberta will face a contraction in overall real GDP growth of 0.8 per cent in 2019.

The recession won’t be as severe as the one in 2015-2016, the report adds. Although, Alberta’s economy is expected to shrink this year, the board forecasts a rebound in 2020.

Some areas are showing signs of improvement after a rough start to the year, the Provincial Outlook Summary for Summer 2019 report states. Mandated production cuts imposed by the provincial government sent oil and gas production volumes down significantly in the first quarter. As constraints on oil production ease month by month, more production is expected in the latter half of the year. However, business sentiment in the energy sector remains negative.

The industries hit the hardest in 2019 in Alberta are construction and drilling, which will register declines of 10.4 and 30.3 per cent respectively for the year, the report explains. Both declines are in large part due to the position of companies in the oil and gas sector regarding the uncertainty surrounding pipelines. The Enbridge Line 3 pipeline was hit with a new obstacle earlier this summer when a set of appeals was successful in sending Enbridge back to the assessment stage to address the possibility of a spill in Lake Superior.

The only chance of additional capacity being built at this time depends on whether the $3.7-billion government rail contract is successfully picked up by the private sector.

The construction of petrochemical complexes in the province will add fire power to Alberta’s economic engine despite its energy sector being clouded with uncertainty. Labour markets will feel the impact of the contraction in real GDP growth, but there will still be job creation. With much of the turmoil concentrated in the energy sector, where output per worker has sky-rocketed in recent years and where much of the restructuring occurred in the deep 2015–16 recession, the number of layoffs in the energy sector will not be significant.

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