Western provinces to lead growth
Conference Board of Canada releases growth forecasts for each province
FINANCIAL POST
CALGARY — Canada’s three most westerly provinces will lead the country in real GDP growth this year as a result of increasing oil production and rising housing prices, the Conference Board of Canada predicts.
The Conference Board released growth forecasts for each province Monday, which showed that Alberta’s economy will grow 3.3 per cent next year — the highest growth rate in the country — followed by 2.5-per-cent real GDP growth in both Saskatchewan and British Columbia.
While a rebound in the energy sector was the main reason for growth in Alberta and Saskatchewan, B.C.’s economic growth would come primarily from demand for housing, MarieChristine Bernard, economist at Conference Board, said in an interview.
Measures to cool the housing market in B.C. were successful for a time, but the housing sector seems to have turned a corner and, even at 2.5-per-cent growth, Bernard said, we might be a little on the low side for growth.”
Giovanni Gallipoli, associate professor of economics at the University of British Columbia, agreed with Bernard’s assessment that housing demand is driving growth in the West Coast.
“If it wasn’t for housing right now, we’d be talking about lacklustre growth. It’s not obvious to me that this is a stable model for growth,” Gallipoli said.
More durable growth comes from enduring productivity gains in industrial and other sectors, not in “demand spurts” in sectors like real estate, he said.
A booming real-estate sector, especially in Ontario and B.C., is also one of the three main drivers of Canada’s national 2.3-per-cent real GDP growth forecast this year, Bernard said. The other two factors are federal stimulus spending and a rebound in the energy sector.
In Alberta and Saskatchewan, which are emerging from brutal recessions caused by the collapse in oil prices, Bernard expects an uptick in drilling activity and oil production to boost growth in both provinces.
“I think it’s the beginning of the recovery but I think it will take more time before we see people benefitting in terms of (positive) pressures on wages and stronger job creation,” Bernard said.
Similarly, ATB Financial chief economist Todd Hirsch said most Albertans won’t feel the effects of the recovery immediately.
“It comes as a bit of a surprise for people because it doesn’t feel like Alberta’s economy is growing again,” Hirsch said, adding, “We’re starting from a much lower bar.”
Over the past two years, he said, Alberta’s economy contracted by 7.5 per cent. “So even with twoand-a-half or 3-per-cent growth this year, that doesn’t even get our economy back to where we were in 2012,” Hirsch said.
Earlier this month, Hirsch released his own forecast that the province’s GDP would grow 2.7 per cent.
Hirsch also pins only part of the GDP growth on the oil price recovery, which he said helped stabilize the economy but expects growth will come from agriculture, tourism and high-tech industries.
“Oil prices are going to really struggle to get above $50 US or $60 US,” he said, adding that companies in sectors like agriculture would have an opportunity to hire people that had previously worked in oil and gas.
West Texas Intermediate benchmark oil prices rose slightly midday Monday, to 49.99 US per barrel, and have persistently hovered around the $50 US per barrel mark for the last two quarters.
The Conference Board report notes that U.S. shale oil production could prevent oil prices from rising much higher, but still expects economic growth in Alberta and Saskatchewan for the next two years.
Bernard said every province except Newfoundland and Labrador would experience real GDP growth this year, but new oil production at offshore platforms in 2018 would result in that province growing by 3.7 per cent next year.