Alberta Premier Jim Prentice says he disagrees with a new Conference Board of Canada report that says Alberta faces the possibility of slipping into a recession this year because of the drop in oil prices.
“I didn’t find [the Conference Board’s] analysis to be particularly cogent, to be frank, and the opinion that they’ve put forward is an outlier amongst all of the other opinions that have been put forward by every one of Canada’s chartered banks and by other respected economic forecasters,” said Prentice, taking questions from reporters in Calgary.
“If you take the consensus of all of the other forecasts that have been undertaken, there is a slippage in economic growth in Alberta from something in the range of 3.2 per cent down to something between 1.8 and 2.2 per cent,” he said.
“Certainly we intend to make measured, balanced fiscal choices that will continue to keep us in a positive growth mode.”
Board’s recession prediction
Much lower energy prices are playing out in different ways across Canada, but the Conference Board said Tuesday the impact is likely to be the most prominent in Alberta’s oil-heavy economy.
Many economists have slashed their growth expectations in recent months as the price of a barrel of oil has nosedived from $105 US as recently as June to under $50 today. But the Conference Board said the province faces more than just a slowdown — it could see an actual recession.
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“Going forward, 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,” Daniel Fields, an economist at the not-for-profit research organization, said in a recent report.
Many provincial governments, and indeed the federal government, have benefited from high energy prices since the recession. But none are so reliant as Alberta, where the provincial government relies on royalties for about a quarter of its revenues.
It’s not just governments that are expecting leaner times. Companies in the real economy that have spent billions expanding the Athabaska oilsands are cutting back.
Late last year Total S.A. postponed its Joslyn oilsands project, while Statoil put the brakes on a Kai Kos Dehseh project. In December, Husky and Penn West both trimmed their spending budgets by billions of dollars. And just yesterday, Canadian Natural Resources, the giant of the space, slashed about $2 billion from what it plans to spend in the oil patch this year.
All those lost dollars are likely to trickle down into fewer jobs, compounding the pain. Shell announced Friday that it was trimming 200 positions.
Some oil patch watchers are bracing for more, as the last time oil prices cratered like this was in the recession of 2008.
“Engineering investment in the province nosedived by about $18 billion, some 30,000 jobs in Alberta’s mining sector disappeared, and housing starts fell 75 per cent,” Fields said.
The Conference Board’s chief economist Glen Hodgson will be a guest on The Exchange with Amanda Lang on Tuesday to give more details of his analysis.