Oil-price slide is top threat to hot economy

Alberta leading rest of Canada, but momentum slowing

Alberta’s economy is still the leader among Canada’s provinces, but the gap is narrowing and oil prices are a concern, BMO Economics says in a new report.

“Alberta remains atop the provincial growth table, but momentum has faded somewhat in recent months alongside the slide in oil prices,” BMO Economics says in its latest Provincial Monitor report, released Thursday.

“With some projects delayed due to rising costs, real GDP (gross domestic product) is expected to cool to 3.5 per cent this year and 2.9 per cent in 2015,” the report says.

In 2013, Alberta’s real GDP was 3.9 per cent.

The growth gap between Alberta and the rest of the country is expected to narrow in the coming year, the report says.

Canada’s GDP is on pace to expand 2.3 per cent this year and 2.4 per cent in 2015.

Alberta’s key strengths remain its energy sector, a surging population and a strong labour market, the bank’s economists say in the report.

Better job prospects, higher wages and low taxes will continue to draw migration from other regions of the country, even if the pace of growth cools.

“(Alberta’s) population surged nearly three per cent year-overyear in the third quarter, similar to rates seen at the height of the prerecession boom,” Robert Kavcic, senior economist at BMO Capital Markets, said in a news release that accompanied the report.

“Not only are job prospects better compared to the rest of the country, but wage differentials also continue to widen.”

But the oil industry is cause for concern, BMO’s economists caution.

The recent slide in oil prices, combined with ongoing cost pressures, has led some producers to dial back or delay their projects, they say.

The economists cite Statoil’s delayed Corner project and Total/ Suncor’s shelved Joslyn project as examples.

The report says the drop in oil prices could impact some smaller marginal producers.

It would probably take sustained sub-$80 oil to really slow economic activity in the province but that is a level “that has quickly come within reach,” the report says.

Prices during the past week have hovered just north of $80 US a barrel.

Meanwhile, business owners in Alberta remain optimistic and are expecting moderate growth in coming years, the bank said.

Its small business confidence index recently found 61 per cent of Alberta business owners expect the economy will be better for the rest of this year.