An economist with Servus Credit Union is predicting better times ahead for Alberta.
Mike Drotar, vice-president treasury with the credit union, says the province should manage 2.7 per cent growth this year and 3.4 per cent in 2014 — both well above the anticipated national averages of 1.8 per cent in 2013 and 2.6 per cent the following year.
Soft commodity prices will probably create a drag on the Alberta economy this year, but longer term, natural gas should reach at least $4.50 per million British thermal units and a barrel of West Texas intermediate oil should be in the high $90 range.
Impacting the long-term economic health of the province will be political decisions related to the development of pipeline infrastructure, said Drotar.
He’s optimistic the Keystone XL pipeline to the U.S. Gulf Coast will be completed, but is less certain about the Northern Gateway pipeline to the British Columbia coast.
“Just Keystone, I think, would be a huge positive boost, especially for this province.”
Unemployment in Alberta will likely remain below five per cent, said Drotar, which could cause problems for some employers.
He downplayed the significance of the $6.3-billion deficit projected in the Alberta government’s March 6 budget. The province’s net debt is only 4.8 per cent of its GDP, Drotar pointed out, as compared with 19.7 per cent in the case of British Columbia and 41.3 per cent when it comes to Ontario.
Only 1.3 per cent of Alberta’s total revenue is required to service its debt, he added, whereas for British Columbia the figure is 4.2 per cent and for Ontario it’s 8.4 per cent.
“I’m not suggesting wild, reckless spending or anything like that,” said Drotar, explaining that debt financing can be a prudent financial strategy for governments and private companies.
Even Canada’s economic outlook is encouraging, he said, and there are also positives on the global stage. The Eurozone is not expected to experience a deep recession, China’s growth of seven to eight per cent annually should be sustainable in the medium term, and there have been encouraging signs with respect to unemployment, housing and the equity market in the United States, he said.
The S&P 500 is up “quite significantly” this year, said Drotar, which bodes well for both the United States’ and Canada’s economic futures.
“That normally can be used as a fairly good leading indicator as to what’s coming up down the road.”
Although the TSX has not rebounded to the extent, it’s still 71 per cent above its March 2009 low and just nine per cent short of its 2011 high, said Drotar.
hrichards@www.reddeeradvocate.com