Report predicts Alberta to slide into recession

CA LGA RY •Alberta’s economy will effectively be in a recession this year, according to a new report released Monday by BMO Capital Markets.

The bank said real gross domestic product growth in the province will slide to 0.4 per cent this year from 4.4 per cent in 2014 and then rebound to 1.9 per cent in 2016.

“Alberta businesses have long benefited from resilience and a cando attitude; the province will benefit from that positive outlook now more than ever,” said Susan Brown, senior vice-president, Alberta and N.W.T. Divisions, BMO Bank of Montreal, in a news release. “The oil and gas story dominates the picture for businesses in Alberta, but we have every confidence that the province’s businesses will continue to show their strength.”

The report, by senior economist Robert Kavcic of BMO Capital Markets, said growth should bounce back next year, assuming West Texas Intermediate oil prices push back up above US$65 a barrel.

He said the energy sector directly accounts for roughly 25 per cent of Alberta GDP, seven per cent of employment and almost two thirds of private non-housing capital spending.

“The drop in prices will likely cut roughly three percentage points from provincial growth this year, largely through the capital spending channels as major producers have slashed their budgets. Oilsands production, however, is expected to hold up much better given that much of the cost of long-life projects is sunk up front. Indeed, total oil production continued to run at an 11 per cent year-over-year pace as of the fourth quarter, led by bitumen,” he said.

For Canada, the report is forecasting economic growth to slow down from 2.5 per cent in 2014 to 1.8 per cent this year and then 2.2 per cent in 2016.