After surviving the worst recession in three decades, Alberta’s economy had started a hesitant recovery in 2017. But almost three years later, the economy remains sluggish.
So, what does the future hold for Canada’s energy province?
This critical question will be the subject of Todd Hirsch’s State of the Province keynote address at 2019 Buildex Alberta.
Hirsch’s presentation, which is entitled Alberta’s Economy 2020: What Next?, will take place on the morning of Nov. 6.
“I hope to bring some clarity to the economic trends that are taking place in Alberta and Canada and help the people attending the talk make better business decisions now and, in the future,” said Hirsch, who is VP and chief economist of ATB Financial.
The Alberta economy has certainly not benefited from recent economic trends.
“We’re not expecting a recession,” said Hirsch. “But our economy has definitely stalled.”
ATB’s most recent (September 2019) Alberta economic outlook shows the extent of the province’s difficulties:
- Capital spending in the oil and gas sector is soft, as investors wait for a number of delayed pipeline projects to be completed;
- The price of Alberta natural gas remains low;
- The number of unemployed people in the province continues to grow, with the average unemployment rate over the first seven months of 2019 at 6.9 percent;
- Consumer spending is down;
- Alberta’s export sector is being hindered by Chinese restrictions on key Canadian agricultural products and a slowing global economy; and
- The construction sector continues to struggle, with the value of building permits issued by Alberta municipalities on track to be about 15 percent lower in 2019.
ATB is forecasting growth of 0.8 percent of Alberta’s real Gross Domestic Product in 2019 and 2.0 percent in 2020.
The improvement in 2020 assumes that the US-Mexico-Canada Agreement (the proposed successor to NAFTA) is ratified by then, and that some of the pipeline issues bedeviling the oil and gas sector are resolved.
“We’re expecting the Enbridge 3 pipeline replacement project, which runs from Alberta to the US Midwest, goes ahead,” said Hirsch. “It replaces an existing pipeline and hasn’t been as controversial as the Trans Mountain Expansion Project, which terminates in Burnaby, BC. It will increase the capacity of the pipeline and enable more heavy oil to be shipped to customers in the US.”
Energy production and export is the biggest driver of the Alberta economy, says Hirsch.
“Although it is large by itself, it also has a major impact on most of the other economic sectors of the provinces,” he said. “And despite the fact that Alberta has a diversified economy, it is different from other Canadian provinces in the extent to which it depends on the energy sector.”
Alberta’s oil and gas aren’t commanding the high prices they once did, but price isn’t the biggest challenge the energy sector faces today, says Hirsch.
“The problem now isn’t so much price as it is insufficient capacity in the form of pipelines to transport oil and gas to market,” he said. “There is a
high level of discouragement and disappointment in Alberta because of the inability to climb out of the situation, and the problem — lack of pipeline capacity — is something it can’t fix.”
According to ATB, capital spending in Alberta’s oil and gas sector in 2019 is estimated at $25.9 billion, three percent below the 2018 figure and a whopping 55.4 percent below record-setting year 2014.
But the Alberta economy is not all doom and gloom, says Hirsch.
Although oil and gas get most of the attention, in the background other industries — agriculture and agri-foods, tourism, transportation, logistics and warehousing, and technology, especially medical technology – are experiencing a golden age.
Hirsch will also speak about the future of work and how workers and employers can prepare for the economic changes that will be taking place in Alberta.
“It will require a change in mentality and attitude regarding career and career planning,” he said.
Buildex Alberta, which combines the former Buildex Calgary and Buildex Edmonton, takes place Nov. 6 and 7 at the BMO Centre in Calgary.