Ceci sees signs of hope
Despite further potential downgrades, Alberta’s finance minister projects growth
As Alberta grapples with continuing gloomy economic news, Finance Minister Joe Ceci is counselling patience.
And while at least one credit rating agency is warning about the potential for further downgrades on the provincial government, Ceci said he’s confident the NDP’s plan to keep up spending is the right move.
Ceci spoke Friday at an event highlighting increased access to small-business loans from ATB Financial, an action taken by the NDP government last October in response to a provincial recession expected to last through 2015 and 2016.
There has been more bad news in recent days, with Western Feedlots Ltd. announcing it is shutting down — and citing government policy as a factor — and new statistics released Thursday that show employment insurance claims in the province nearly doubling in the 12-month period to July.
“I know times are tough right now all across Alberta and most certainly here in Calgary,” said Ceci at Blush Lane Organics, a grocery store just about to open in the Bridgeland neighbourhood.
“No one can say with absolute certainty whether we’ve turned a corner yet, but there are signs of hope. Next year, we anticipate a modest recovery,” he added, not- ing the province is forecasting 2.4 per cent GDP growth in 2017.
But Alberta’s economy and the government’s bottom line have been battered by a prolonged slump in the price of oil, dating back to late 2014.
The NDP government has responded by maintaining existing program spending and ramping up infrastructure cash as an economic stimulus.
But the province’s record-setting deficit — $10.4 billion in the first quarter of the 2016-17 fiscal year — and increasing debt levels have contributed to credit downgrades from rating agencies DBRS, Moody’s and Standard & Poor’s.
A report by DBRS from earlier this month raised concerns about the government’s extended timeline for returning to balanced books only by 2024, as well as the possibility of a weak recovery in oil prices and “unproven” expenditure restraint targets.
“Should oil prices fail to recover on a sustained basis without an adequate fiscal response and resulting in faster- than- planned debt increases, this could lead to further downward pressure on the ratings,” reads the report, which suggested additional tax measures may be needed to accompany spending cuts.
Ceci noted that no credit downgrade is currently being considered by DBRS and said the government will stick with its expenditure plan.
“We have been clear as a government we are going to be a shock absorber for the downturn in this economy,” said Ceci, adding that the province is capable of running deficits in the short term as it plans its return to surplus.
“For the time being, while this economy is suffering so badly, we’re going to be there assisting.”
But Wildrose finance critic Derek Fildebrandt accused Ceci of “keeping his head planted firmly in the sand” on both the shape of the economy and the province’s books.
He said both rating agencies and businesses won’t have confidence in Alberta unless the NDP “drops the attitude whereby cutting a single dime of public spending is going to be considered catastrophic for the economy.”
Fildebrandt said to boost the economy the government should roll back personal and corporate income tax hikes brought in by the NDP last year, stop the implementation of the carbon tax that comes into effect on Jan. 1 and halt the plan to raise the minimum wage to $15 an hour by 2018.
Ceci said economic fundamentals remain strong in Alberta, noting the province has the highest GDP per capita and the highest level of private capital investment in Canada. That remains the case despite a significant drop over the last year.
Signs of a recovery remain elusive, however. Statistics released Friday show retail sales are down 3.8 per cent from last year in Alberta, though ATB Financial economist Todd Hirsch noted in his newsletter that the numbers are surprisingly good given the depth of the recession.
Oil prices, which had appeared to rally this week, had their biggest drop since July on Friday on news that Saudi Arabia and Iran had failed to reach a deal on production cuts. The benchmark West Texas Intermediate closed at $44.48.
ATB Financial CEO Dave Mowat, who attended the event with Ceci, said the Alberta economy is in the painful process of restructuring to deal with lower priced oil.
“What that blurs is there is an awful lot of business going on in Alberta,” he said, pointing to areas such as tourism as a bright spot.
In the budget Ceci released last fall, the province increased the capital available to governmentowned ATB by $1.5 billion for loans to small and medium-sized businesses.
In the first quarter of the 2016-17 fiscal year, ATB loans were up by $23 million from the same period, with an additional 171 business receiving the loans.
Blush Lane Organics has been a recipient of an ATB loan, helping the company to open its new Bridgeland grocery store.
Company CEO Rob Horricks said the current economic downturn creates opportunities for smaller businesses that didn’t exist before.
He said larger grocery store chains have cancelled or delayed plans, while the Calgary company has been able to move ahead.
“I’ve seen the ups and downs,” said Horricks. “To me, this is the perfect time to be opening new stores and new businesses.”