Alberta economic boom shows no signs of slowdown, says RBC
Alberta’s economic boom is showing little sign of slowing down, says Canada’s largest bank.
The RBC Economics provincial outlook, released Thursday, states Alberta will continue to be among the fastest-growing provincial economies in 2013 with a real GDP growth rate of 3.5 per cent, second only to Newfoundland & Labrador’s 4.4 per cent.
Alberta will regain the top spot in the country in 2014, with projected Real GDP growth of 4.2 per cent.
“Alberta is in the midst of an impressive economic boom, with activity in the province surging by 5.1 per cent in 2011 and remaining on the fast track in 2012,” said Craig Wright, senior vice-president and chief economist with RBC.
“While massive investment in the energy sector — which was the key catalyst for the economic boom — has been tempered recently, strong capital expenditures and rapid momentum in other sectors will keep the economy moving ahead at a sustained clip.”
But RBC said the mood in the province remains somewhat cautious, as Alberta’s oil sector finds itself increasingly “land locked” due to pipeline bottlenecks. It said major players in the oilsands have cited delivery challenges and a greater than usual discount on wellhead prices as reasons for delays in spending on mega projects.
RBC said these delays have raised some concerns about the sustainability of business investment in the province and it expects major players in the oilsands to remain generally cautious in 2013, keeping spending in a holding pattern while pipeline issues are addressed and crude oil price relationships normalize.
The report said Alberta will benefit from broad-based expansion in 2013, with strong population growth and employment continuing to fuel consumer spending and housing activity showing continued vigour. On the business side, rising demand for commercial and industrial space will support growth in capital spending outside the energy sector.
Economic growth for this year is estimated at 3.8 per cent, the best in Canada, following 2011’s 5.1 per cent which also set the pace for the rest of the country.
“We anticipate that Alberta’s growth will slow modestly next year thanks in large part to the lull in oilsands investment,” added Wright. “However, sufficient progress in resolving these oil delivery issues in 2014 should allow for major projects to proceed, setting the stage for a 4.2 per cent re-acceleration in growth.”
The RBC report takes a relatively bullish stance on the prospects for the Canadian economy going forward, with national growth forecast at 2.4 per cent in 2013 and 2.8 per cent in 2014.
Wright says he believes the global economy is putting a number of hiccups that occurred in 2012 in the rear-view mirror and is ready to start accelerating again. That will be good for Canadian exports, he says, which is the key reason the country’s economy underperformed this year, at an expected two per cent growth rate. It braked to as low as 0.6 per cent in the summer months.
Wright’s sanguine view on exports comes despite the fact that RBC sees the Canadian dollar strengthening to about $1.05 US by the end of 2013. A strong dollar makes Canadian products more expensive and less competitive in foreign markets. “I would say we are cautiously optimistic,” Wright said. “We’re slightly more upbeat than consensus, but not dramatically so.”
The RBC forecast is slightly rosier than the Bank of Canada’s call for 2.3 and 2.4 per cent growth in the two years, and even more at odds with the consensus forecast of 2.0 per cent for 2013. TD Economics, in its quarter economic forecast released Thursday, said Canadian economic growth is expected to edge down to 1.7 per cent in 2013, before picking up to a healthier 2.5 per cent in 2014.
“In Canada, the first half of 2013 is shaping up to be quite soft. Fiscal consolidation in the U.S. alone could shave 0.5 percentage points off Canadian economic growth through lower exports and the knock-on-effects to other areas of the economy,” said TD. “Beyond mid-year, the rebound in the U.S. should help support a modest recovery in Canadian export growth.
“However, the Canadian economy will still face headwinds from a high Canadian dollar, elevated household debt and government restraint.”