Some prominent economists say they do not agree with the Conference Board of Canada’s prediction that Alberta will slip into a recession this year.
- Jim Prentice slams Conference Board report on possible Alberta recession
- Oil rout resumes, dragging Canadian dollar under 84 cents and TSX down 120
Todd Hirsch, the chief economist with ATB Financial, told small business owners in downtown Calgary that he expects a soft year not a recession.
He expects the economy will still grow by two per cent.
The Conference Board of Canada expects a contraction in 2015 because the plunging price of oil is impacting all areas of the economy from corporate investment and hiring to consumer spending.
“The province is certain to suffer, especially on the employment front, from the drop in oil prices — and it is likely to slip into recession,” said a report by Conference Board of Canada economist Daniel Fields.
During Alberta’s last recession, roughly 30,000 jobs were lost and housing starts fell by 75 per cent. Alberta could take a similar hit if oil prices do not recover soon, according to the Conference Board.
Slowdown still expected
But Hirsch still expects a bumpy ride for many Albertans in 2015.
“It will be a challenging year for new grads and the job market,” he said.
Otherwise, he expects interest rates to remain low and Canadian dollar could fall in value further this year.
“With the dollar trading at 83 cents to the U.S. dollar that is probably good news for the Canadian economy right now,” said Hirsch.
Economist Pierre Cleroux with the Business Development Bank of Canada echoed similar remarks at the Calgary Chamber of Commerce event.
“I don’t believe there will be a recession, there will be a slowdown,” he said.
He suggests the global economy is growing and that is good news for Alberta and its exporting industries.
— Kyle Bakx (@KyleBakx) January 13, 2015
Prentice rejects recession
Alberta Premier Jim Prentice says low oil prices will translate into a $7 billion loss in royalty revenue.
Prentice said he is confident the government will get through the drop in crude prices.
He suggested having discipline in spending will help weather the storm.
“We are living beyond our means and in a sense we are living on resource revenue that properly belongs to our children and our grandchildren,” he said.
Prentice said Albertans are tired of the roller-coaster of revenue from the energy sector, and a special committee is expected to look at the issue.
Prentice says he doesn’t believe Alberta will slip into a recession. Says he believes province will stay in “positive growth mode” #cbc
— Briar Stewart (@briarstewart) January 13, 2015
In the last year, several large oil and gas companies have announced spending cuts.
Total S.A. postponed its Joslyn oilsands project, while Statoil put halted its Kai Kos Dehseh project.
Husky, Penn West and Canadian Natural Resources slashed billions of dollars in spending.
Some companies have announced job cuts including Shell and Nexen.
Suncor Energy announced Tuesday it will cut approximately 1,000 jobs and reduce its 2015 spending plans in response to lower oil prices.
Real estate softening?
Real estate experts are noticing the market softening in the province.
Don Campbell is a senior analyst with the Real Estate Investment Network, which analyzes the economy and its impact on real estate in the country. He is also a real estate investor and the majority of the 128 properties he owns are in Alberta.
“The clock is ticking,” said Campbell.
“We have hit the magic six month mark of oil price decline and historically that is when oil prices start to be reflected into the confidence of the real estate market. So we are starting to see listings jump substantially here in January and that will then reflect into the market prices in February and March.”
As the real estate market softens, Campbell said the homebuilding industry will also slow down as well.