The outlook for Alberta’s economy is darkening as economists revise their 2014 estimates of the province’s growth in the face of low oil prices.
CIBC is predicting Alberta’s economy will shrink by 0.3 per cent in 2015, as activity in the oilpatch dries up.
And the Conference Board of Canada says the drop in oil prices will strip more than $40 billion US from corporate coffers this year.
It has revised its growth forecast for all of Canada to 1.9 per cent for 2015, down from 2.4 per cent in its previous forecast given last November.
“The pain will be severe, particularly in Alberta and Newfoundland and Labrador, and, to a lesser degree, in Saskatchewan,” the Conference Board report said.
The economic think-tank estimates oil prices will level out at about the $60 US a barrel level, probably in the first quarter of 2015. That’s still 40 per cent below last year’s prices.
If Canadian oil producers export about three million barrels of oil per day in 2015, the low price will cost them more than $40 billion US in lost revenues, the report estimated.
That will lead to a slowdown in capital spending and in employment in the sector.
Recession for Alberta
In its latest forecast, CIBC’s research department says unemployment in Alberta will jump from 4.7 per cent to 6.8 per cent by the end of the year.
“I think Alberta is going to toy with recession. Our number is negative 0.3 for 2015, so basically a recession,” said Benjamin Tal, deputy chief economist at CIBC, in an interview on The Exchange with Amanda Lang.
“Why? Look at what happened in 2008 – basically the same situation. The economy went down, you see a significant increase in unemployment,” he continued.
Alberta has enjoyed a net migration of 80,000 workers, many from Atlantic Canada, in recent years to snap up easy to find jobs. But as work disappears, these people might be slower to leave the province, pushing up unemployment figures, Tal said.
He also predicted a downturn in the housing sector and declining household income for Alberta.
“I predict the number of bankruptcies in Alberta probably will rise by 40 per cent over the next year or two – that’s more or less the same number we’ve seen in 2008. It’s not a huge issue because it’s starting at a very low base,” he said.
The Conference Board of Canada agrees, forecasting a hit to Alberta’s housing sector with a steep slowdown in housing prices and housing starts.
Both CIBC and the Conference Board see an improvement in the economies of Ontario and Quebec, as the lower dollar, a decline in energy prices, improved productivity and a resurgent U.S. economy create perfect conditions for the manufacturing sector.
CIBC predicts Ontario could grow by 2.8 per cent in 2015 and 2016 and Quebec by 2.4 per cent and 2.6 per cent.