OTTAWA, Dec. 8, 2016 /CNW/ – Alberta is forecast to emerge from one of the worst recessions to hit the province in decades next year, albeit economic recovery is likely to be modest, according to The Conference Board of Canada’s Provincial Outlook: Autumn 2016.
“It appears that the worst may be over for Alberta, but the road to recovery won’t be easy. Given the lower oil price environment, energy sector budgets are not expected to increase substantially over the next few years, capping the province’s economic growth prospects at around 2 per cent at best” said Marie-Christine Bernard, Associate Director, Provincial Forecast, The Conference Board of Canada.
- Alberta is finally out of recession and can expect to see real GDP growth of 2.2 per cent in 2017.
- Rebuilding efforts following the Fort McMurray wildfires will contribute 0.4 percentage points to real GDP growth in 2017.
- With the exception of Newfoundland and Labrador, all provinces will see their economy expand next year.
The landscape has changed with massive cutbacks in capital budgets in the oil industry. The recent stability in oil prices is forecast to help stem the decline in capital expenditures and set the pace for a recovery that will span over a few years. Nevertheless, and despite the recent OPEC supply cut announcement, there remains a lot of oil in storage around the world that will keep the West Texas Intermediate oil price from going much above US $55 per barrel over the next year.
The recent election in the United States also offers fresh hope for getting more Canadian crude oil to markets. The Keystone XL pipeline that was rejected by the Obama administration will likely be more favoured by the incoming Trump administration, as it was one of the President-elect’s campaign promises. As well, the federal government approval of the expansion of Trans Mountain pipeline is welcomed news for Alberta’s energy sector, but the project still has to overcome hurdles and legal challenges before investment takes place.
Alberta weathered some tough economic times over the last two years and their misfortune deepened as wildfires tore through communities and resulted in temporary shutdowns in the oil patch. The wildfires hindered oil production and exports and also hurt employment throughout the spring and summer. The rebuilding efforts in Fort McMurray should kick into high gear early next year and this will have a positive impact on economic growth in 2017.
Overall, real GDP growth is expected to reach 2.2 per cent in 2017. Rebuilding fire-ravaged Fort McMurray will contribute 0.4 percentage points to real GDP growth in 2017.
The Provincial Outlook: Autumn 2016 is available via the Conference Board’s e-library.